What is the Big Beautiful Bill?
This a Bill before the US Senate that proposes various tax reforms and cost-cutting measures aiming to tame illegal immigration among other objectives.
One of the tax reforms in the Bill is a proposal to impose an excise tax on money transferred from the US to other countries by non-citizens. It is a transaction-based levy tucked in the 1, 116-page of the Bill.
What is the proposed tax rate?
The Bill initially proposed a 5% rate of the value of the cash being transferred. The House of Representatives however, lowered the rate to 3.5% when the Bill was on its floor.
Who will the Proposed Tax affect?
The Bill targets non-citizens in the US including the following:
- Green Card Holders – Kenyans with permanent status in the US.
- Highly skilled Kenyans employed by American companies under H1-B Visa.
- Kenyans temporarily transferred to work in a branch of a multinational in the US under the L1 visa.
- Kenyan students in the US under F-1 visa.
- Kenyan migrants who are not verified US citizens or nationals.
Who will be exempted?
- US citizens and nationals who shall be eligible for a refund. US citizens differ from citizens in that they owe allegiance to the US and largely consist of persons born in American Samoa or on Swains Island.
- Money sent via certified remittance transfer provider (RTP) registered with the Internal Revenue Service (IRS). This is because the RTP is capable of verifying the citizenship of the sender and has entered into a written agreement with the Treasury to verify the status of senders as US citizens or nationals.
Who will withhold the excise tax?
The Bill tasks RTPs with the responsibility of withholding the proposed tax. They are also required to file information returns on the outbound money transfers.
RTPs will also report information on US citizens and nationals eligible for tax credit, provide aggregate data on taxes withheld and remitted by senders who are not US citizens and nationals as well where the tax did not apply.
How will the tax impact diaspora remittances?
In 2024, Kenya received $2.63B (about Ksh339.17B) in remittances from the US, an equivalent of 2% of the Ksh16.22T GDP which is higher than the total FDI flows estimated at $1.504B (Ksh 194.02B) in 2023 by the UN conference on Trade and Development.
The excise tax will take about $92.05M (about Ksh11.88B) in remittance excise tax from the Kenyan diaspora. This is averagely 9% of the value remitted to Kenya.
This tax will raise the cost of transferring money and go against the UN Global Compact on Migration Objectives 19 and 20. Objective 19 focuses on facilitating conducive conditions for migrants and diasporas to contribute to sustainable development in all countries, while objective 20 calls for the promotion of faster, safer, and cheaper remittance of transfers and fostering financial inclusion for migrants.
At what stage is the Bill?
The Bill was passed by the US House of Representatives and it is set to be tabled in the Republican-majority Senate for consideration and final green light before it is enacted into law.
The tax will be enforced from January 1, 2026, if it is passed by Senate and enacted into law.
Update: The bill was passed by the Senate and signed into law by President Trump.
Written by: Micheal Muya | Tax Lead MMW Advocates LLP
Contributors: Brian Onyancha | Legal Intern MMW Advocates LLP