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What are the Tax Implications of international wire transfers? – Key considerations for sending money abroad

DNBC Team DNBC Team

Jan 09, 2023

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“Do I have to pay tax when I transfer money overseas?” seems to be the popular question for many people who are living overseas, or expats working abroad, international investors and entrepreneurs. You can experience delays and difficulties if you approach the situation incorrectly. Or even worse, you can find yourself facing legal issues or having your account suspended on reasons of possible money laundering. The regulations will be different between countries and in this article we are going to go through some tax implications for international money transfers in general and for transactions that are related to the US and the UK tax laws.

What are the Tax Implications of international wire transfers? - Key
 considerations for sending money abroad

What are the Tax Implications of international wire transfers? – Key considerations for sending money abroad

*Disclaimer: Please be aware that, despite our best efforts to keep this information accurate, DNBC does not offer tax advice. For information that is specific to your situation, you should always seek the guidance of a tax professional.

Factors affect on money transferred from overseas

The obligation to pay tax on foreign money transfers depends on a number of factors.

  • Sources of the funds include gifts, inheritances, property sale proceeds, etc.
  • Both countries’ tax regulations (where the assets originate from and where they are being sent).
  • The amount of money you’re transferring.
  • Your residency status.

In general, you won’t likely have to pay additional taxes on the money if you are transferring your own existing assets to yourself. Of course that money in your sending account has been verified as the eligible source of funds before you make the transfer initiation.

Additionally, most nations do not typically impose taxes on transfers of existing assets to a spouse, especially if you have a joint account.

Income you earn from abroad, such as capital gains, pension payments, and job income, is commonly taxed if you have legal residency status in a new nation.

Sending overseas wire transfers on behalf of your business may subject you to taxation.

When paying tuition for a child to study abroad who is regarded as a dependent for income tax purposes, this expense may not be seen as a financial gift and you are unlikely to be taxed on it. On the other hand, if you send money for your mature son or daughter overseas, it may be considered as a financial gift and you may be imposed tax on this transfer.

Although paying for medical procedures or other costs related to elderly relatives’ health care is typically not viewed as a gift, different governments have varied rules for evaluating whether tax is necessary.

Transfer a large amount of money overseas

If you want to move a huge amount of money after receiving a large inheritance or selling a property abroad, you may be subject to taxes like inheritance tax, gift tax, or capital gains tax. You might not have to pay tax again to repatriate the money from abroad once those taxes have been paid in the local jurisdiction where the assets were first acquired and the money is yours.

Double taxation agreements are in effect in many countries, but not all, to protect citizens from paying taxes on the same income twice. You might need to provide evidence that you paid any estate or gift taxes to a foreign country, though.

What US regulation applies to wire transfers?

About Internal Revenue Service (IRS)

The Internal Revenue Service (IRS), a federal agency of the United States established in 1862, is in charge of collecting federal taxes and enforcing tax regulations. The majority of the IRS’s labour in 2020 will be processing almost 253 million tax returns, both corporate and individual.

The IRS is in charge of performing audits to make sure that taxpayers are being honest with their claims and payments, and are not taking shortcuts or concealing assets or income. The number of IRS audits has decreased yearly since 2010, when it reached a peak.

The IRS does keep track of foreign wire transfers, and there is a $10,000 threshold that must be met before the transfer is reported to the IRS. According to IRS international wire transfer rules, if you transfer money valued at $10,000 or more will be reported by the bank or money transfer service provider to the IRS directly, making sure that transfers are not illegal such as activities related to money laundering or crime funding.

What supporting documents remittance service providers may ask?

Your bank might also need extra details when it comes to international banking transfer valued from $10,000, such as the ones listed below:

  • Proof for the source of the funds
  • Proof for the source of wealth – general methods of income generation
  • Details on the receiver, including ID proof
  • The main reason for the transfer (remittance description)

How the US Taxes foreign inheritances

Before an estate is transferred to the intended recipient, the Internal Revenue Service (IRS) imposes taxes on it. Any property or other assets that are located or based in the United States are likely to be taxed.

It’s important to keep in mind that the IRS will only tax assets from within the United States and will not tax assets that are held outside of the nation and have no connection to any businesses or real estate with US addresses. The IRS won’t tax an inheritance as long as it comes from a non-American resident or citizen and is entirely held outside of the United States. However, keep in mind that some states can impose an inheritance tax on the funds; ensure that you speak with an experienced international tax expert.

International money transfers to the US

International money transfers to the US

How much money can I send abroad from the UK?

The UK regulations don’t impose a specific amount of limit when it comes to international remittance via banks or online transfers or wire transfer. However, every financial institution has their own policy to mitigate risks regarding AML and financial fraud prevention.The following are some examples of the international money transfer limitations imposed by the major UK banks.

  • Natwest: £25,000
  • HSBC: £50,000
  • Barclays: £50,000
  • Lloyds: £30,000

What tax implications are imposed if I send money abroad from the UK?

International payments sent from the UK are not subject to taxation; therefore, the recipient country’s tax regulations itself will determine any effects.

If you intend to receive money from outside, UK tax regulations will apply, and in such cases, where you are domiciled will determine (where you ordinarily pay tax, not where you are currently living) how much of your income is subject to taxation.

Key Considerations for international money transfers

When you intend to make a wire transfer, it is important to choose the appropriate service providers who specialize in borderless remittance to ensure your transactions are moved seamlessly with best foreign exchange rates.

A global payment provider can help you move money using Sepa and Swift, and their system is capable of instantly classifying your type of transfer and allocating it to the most appropriate choices with the lowest prices.

What information do I need to send money overseas?

Depending on the method of transfer you choose and the country to which you are sending the money, you will require different details.

  • Beneficiary name
  • IBAN: A typical 34-character string. It consists of four letters for the country code, four letters for the bank’s name, and a string of digits for the recipient’s account number and sort code.
  • The BIC or SWIFT code: They consist of 8 – 11 characters and display the name, location, and branch information for the bank.
  • For nations not using SWIFT or BI: The national clearing code or routing code.

International money transfers to the UK

International money transfers to the UK

More about DNBC Financial Group

DNBC Financial Group is an international payment corporation which was established in 2017. We offer money transaction solutions anywhere in the world.

By setting a high standard for innovation in the money transfer platform since 2017, DNBC Financial Group has given full payment solutions to collecting payments, transferring and managing funds.

Currently, DNBC Financial Group has a considerable number of customers all around the world and is well-known as one of the best international money transfer service providers.

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Note: The content in this article is for general informative purposes only. You should conduct your own research or ask for specialist advice before making any financial decisions. All information in this article is current as of the date of publication, and DNBC Financial Group reserves the right to modify, add, or remove any information. We don’t provide any express or implied representations, warranties, or guarantees regarding the accuracy, completeness, or currency of the content within this publication.