Background on the Issue
As a proposed 3.5% tax on remittances continues to advance in the US Congress, Mexican origin senders could face an additional $12 charge on the $350 they typically send to their families in Mexico, according to Valerie Angelkos, spokesperson for the Zapp remittance platform.
Impact on Senders
This translates to a 2.5 times higher cost for sending money home compared to today’s rates, Angelkos estimated.
Mexican immigrants using the Zapp platform are highly sensitive to the cost and price of remittances, as every dollar counts for them to ensure their family members in Mexico receive the full amount.
Consequences of the Tax
Besides the direct impact on senders’ costs, there will be consequences for both the amount of money sent and the frequency of transfers to Mexico, Angelkos explained.
From the Zapp office in Miami, she predicted that people would seek alternative methods to send money if the proposed tax is implemented by the US Congress, increasing the risk of using unofficial channels.
These unofficial channels may be less secure, raising the risk of fraud or loss of funds.
Immigrant Demographics and Financial Capacity
Angelkos clarified that not all Mexican immigrants can afford to pre-send remittances to avoid the tax, particularly those without a Green Card, which legally allows them to live and work in the US.
Mexican origin remittance senders typically live on their monthly salaries and wait to receive funds before sending money home.
Experts in Mexico estimate that half of the $64.745 billion in remittances received in Mexico come from undocumented migrants.
Impact on Financial Services Industry
The digital remittance platform also anticipates a broader impact on the financial services industry if the proposed tax on remittances, included in the US federal budget for 2026, is approved.
If passed, they would need to adjust their collection methods to accommodate new compliance, access, and adoption challenges.
This could make money transfers more complicated for users, requiring multiple documents and taking more time, negatively affecting the digital money-sending experience.
Waiting for Details
Angelkos mentioned that once the proposal is approved, they need to understand who it affects, when and how it will be implemented.
Currently, they are told it applies to all remittance senders, but they don’t know how it will work with Green Card holders.
If approved, the tax would take effect in January, giving them time to adapt.
Key Questions and Answers
- Who will be affected by the tax? Both citizen and non-citizen immigrants sending remittances will be subject to the tax.
- When will the tax take effect? If approved, it is expected to start in January.
- How will the tax be implemented? Citizen senders can offset it in their annual tax declarations, while non-citizens cannot.
There are approximately 10.9 million Mexican immigrants living in the US, making them the largest group of foreign-born residents, accounting for nearly 23% of all non-US born individuals.
Value of Remittances
Mexican immigrants in the US often work long hours in essential sectors, earning between $2,000 and $3,000 gross monthly income. For them, every dollar counts.
The latest data shows that Mexico received $5.15 billion in remittances throughout March, with an average transfer of $383, representing an 18.9% annual increase when converted to Mexican pesos due to the depreciation of the peso against the dollar.
A remesadora is a licensed and regulated company that sends international money transfers to Mexico.
Zapp is not a traditional remesadora but operates through regulated financial entities as a digital technology platform, providing users with all necessary information to securely send money via a direct link from the company’s official website.
