Tax guidelines and regulations for large money transfers into Philippines

Regardless of whether you’re sending cash or a direct bank deposit, transfers over $10,000 need to be reported to the US government, and transfers over ₱250,000 will need to be reported in the Philippines, too.

How the Philippines regulates large remittances

Throughout 2018 and 2019, the Philippines imposed stricter tax guidelines on gifted money. Gifts of over ₱250,000 — or about US$5,002, will be taxed at a rate of 6%. The donor is responsible for filing BIR form 1800, regardless of whether or not they reside in the Philippines.

The new laws also don’t have different tax brackets based on your relationship to the recipient. Gifts to relatives are taxed at the same rate as gifts to friends. Though certain types of gifts, like gifts to some charities, are exempt.

Check with a tax professional if you’re unsure if you need to file and/or you need help filing your tax returns.

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What are the penalties in the Philippines if my recipient fails to file?

Failing to file a large remittance can result in steep and complicated penalties. For example, if they owe taxes and miss the April 15th deadline, they can expect to pay 25% of the taxes due, plus 20% annually until the tax is paid. If they even mistakenly fail to include the money they’ve received, they could be found by the tax courts to have wilfully filed a false or fraudulent claim, which comes with a 50% penalty on the tax due.

Do I have to report large transfers out of the US?

You might. If you’re sending more than $10,000, you may need to file:

• Form 8300. Currency transaction reports need to be filed for all transfers over $10,000. Usually the bank or transfer company will handle this, but if you’re sending money for business purposes you may also need to file.
• Form 114. If you have a foreign bank account that’s held over $10,000 at any point in the past year, you’ll need to file.
• Form 709. If you’ve transferred $15,000 or more in the last year intended as a gift, you’ll need to file.

By law, banks report all cash transactions that exceed $10,000 — and any transaction of any amount that alerts their suspicions. Independent money transfer businesses are sometimes required to report amounts as low as $1,000, depending on the circumstances.

Sending a lot of money out of the country? Know what the IRS expects of you.

Must read: How much money can I send to the Philippines?

You can send as much money as you want to the Philippines.

While there is not a legal cap, some transfer providers will set their own limits. If you plan to initiate a large transfer, Xe doesn’t have a maximum transfer limit.

How will my recipient in the Philippines get the money?

Depending on the bank or transfer service you choose, your recipient can pick up the money in cash or have it deposited directly into their account or mobile wallet.

If your friends or family are picking up your transfer in person, advise them to take along ID and any transaction or confirmation number on your receipt.

As with all international money transfers, be wary of potential fraud and only send money to people you know. Using a reputable provider can safeguard you from potential scams.

Send money to the Philippines

Bottom line

Online transfer providers make it easy to send money to the Philippines, but if you’re sending money to a foreign account in your name or more than $15,000 as a gift, you’ll need to let the IRS know — and your recipient may need to include it on their taxes. Before sending money abroad, compare international money transfer companies to make sure you’re getting a fair rate.

Frequently asked questions

• Is dealing with the IRS a hassle when transferring large amounts?

  No. If you follow the law and submit your legal documentation in a timely and accurate manner, you shouldn’t experience hassles with the IRS. If you choose not to follow the law, you may be on the hook for stiff penalties, including jail time.

• Can I avoid IRS penalties if I fail to file a gift tax return?

  Penalties can be avoided if you can show the IRS reasonable cause for a failure to file. This is up to the discretion of the IRS, but accepted reasons have included fire, natural disaster, serious illness and incapacitation.