There are laws and regulations that people must be aware of before sending money abroad for any reason whatsoever. This applies just as much to foreign nationals with a work visa, as it does for permanent residents and citizens of the concerned nation.
The consequences of making mistakes while sending money to another nation can be as straightforward as a failed transaction, or it could be as severe as state prosecution for tax evasion. Avoid making any of those mistakes by going through the following points.
The Sender Must Report Their Entire Income, Including Outgoing Foreign Remittance
The sender should focus on knowing and complying with applicable tax laws implemented by the nation where they are working/living right now. For example, someone who works and lives in the US may still have family living back home in Mexico. They can send money to Mexico easily via electronic money transfer, without suffering the heavy transaction fees of a wire transfer. However, every dollar above $17,000 sent abroad in one year must be reported to the IRS as part of the sender’s annual income tax documentation. Failure to report any portion of one’s income that they remitted to a foreign nation will also lead to hefty fines. If the tax evasion charge is for a big amount, it can lead to IRS investigations, tax audits, additional interest, and even jail time.
There Could Be A Gift Tax
Depending on how much money you send to a foreign country in total, there may or may not be additional taxes for you to pay. When applicable, the gift tax is levied on outgoing foreign remittances exclusively, which must be paid in addition to the income tax. For example, if you are sending money to a foreign country from the US, you will need to pay a separate gift tax if or when the total amount sent abroad exceeds $12.92 million at any point during the sender’s lifetime.
There Could Be Additional Fees And Taxes For The Recipient To Pay
There are no universal laws when it comes to fees and taxes related to receiving foreign remittances either. It all depends on factors such as:
- How much money is sent to the recipient in one financial year?
- Who is sending the money?
- What is the purpose behind the international funds received?
- Which nation is the money being sent from?
- In which nation is the recipient receiving their international funds?
- What medium of transfer was used to transfer the money?
- What was the currency used by the sender to transfer the amount?
For example, you can receive as much as $100,000 in the United States as gifted foreign remittance from another nation, without having to pay any tax for it. However, that’s only true if the amount received is indeed being gifted to the recipient by a friend or family.
Foreign remittances received as payment for professional reasons will not be exempt from any applicable US tax laws. Then again, that’s just how things work in the United States. The recipient must be aware of how foreign remittances are taxed in their country.
