Sending Money from the US to the Philippines? Here’s What You Should Know

Today, advances in technology and globalization have made it easy to send money from anywhere in the world. 

People send (and receive) money internationally for all sorts of reasons, from remittances to relatives at home, to income earned from work done abroad. For instance, overseas workers are reported to send more than $400 billion in remittances to their home countries every year. 

While it’s always great to send something back home from time to time, making international transfers is not always easy, or affordable. The World Bank reports that remittances to East Asia and Pacific region typically cost an average of 7.13% for every $200 dollars or even up to 15.4%. This is often due to several factors, including what service you utilize to send money, applicable tax regulations and fees charged. 

When it comes to sending money from the US to the Philippines, things can get very stressful and expensive. But when you know what to expect, you can plan better. Here’s all you should know about international transfers from the US to the Philippines. 

What are your options for sending money overseas? 

People who want to send money to any location or country in the world typically have a range of options. Your eventual choice will depend on several factors, including how transparent the fees are, exchange rates, the security of the service provider and the speed of the transfer. The options available for making international transfers include: 

• Physical or wire transfer through your bank: Most banks offer international wire transfer services, although they can be quite expensive and will typically take days. The bank will charge fees for the transfer, and you will need to pay SWIFT charges as well. 
• Online money transfer services: Money transfer services such as PayPal and Western Union let you send money anywhere in the world, almost instantly. Fees for these transfers vary, although they can also be expensive. 
• Specialist transfer services: Due to their relative newness, these services typically offer competitive exchange rates and lower fees. They include Transferwise, Payoneer, Skrill and many others. 

Sending money from the US

There are several considerations to keep in mind when sending money to any other country from the US. Senders will usually need to abide by a host of regulations relating to the amount of money sent, and for what purpose. Here’s what you should know. 

What information is required? 

Money transfer services will usually want certain information that helps them complete your transfer and comply with their legal obligations. If you already own an account with the sender, then you’ve likely provided this already. Otherwise, you will need to provide: 

• ID, preferably government-issued, such as an international passport
• Your address, including proof, such as a recent utility bill
• Your social security number 

The information required may be more than this, depending on how much you’re sending.

Are there limits to how much you can transfer?

Not necessarily. Many transfer services have upper limits for how much you can send at a go, but these are just administrative rules. You can legally send as much as you want, so far as you comply with applicable regulations. 

These include the reporting obligations that accrue if you intend to over $10,000 or more in a single transaction, and sometimes, a series of transactions. 

What happens if you’re transferring over $10,000?

US legislation such as the Bank Secrecy Act and the Patriot Act require people sending money internationally, above $10,000 (sometimes $1,000), to make certain disclosures. The purpose of these rules is to combat money laundering and the financing of terrorist activities. For these transfers, you may be required to disclose: 

• Your source of wealth, including proof such as a pay slip 
• The source of funds you are currently sending 
• Reason for the transfer 
• Information about the beneficiary 

Apart from this, there may also be requirements to file certain documentation in respect of the transaction. These include: 

• Currency transaction report: Generally, personal transactions above $10,000 must be reported by your bank or transfer service. If you own a business and send cash payments over $10,000, you may also need to file IRS Form 8300. 
• Foreign bank account report: If you live in the US and have a bank account with money over $10,000 outside the US, you may need to file FinCEN Form 114.
• Currency and monetary instrument report: This obligation falls on people who carry physical currency outside the US. You may need to file FinCEN Form 105. 
• Foreign trusts and gifts: For those who own or manage any part of a foreign trust or send money to such a trust, you may need to file IRS Form 3520. 

Must I pay tax on money I send overseas?

Generally, you do not have to pay taxes on transfers outside the US. But if the money is being sent as a gift, which basically covers any situation where you send money without receiving something in return, gift tax may apply at a rate of 18% to 40%. Although, gift tax will not apply on: 

• Gifts below the annual exclusion, which is $15,000 per year to a single recipient
• Tuition and medical expenses 
• Gifts to one’s spouse
• Gifts to a political organization 

Receiving money in the Philippines

Now we’re clear on what you should pay attention to when sending money out of the US, what about when receiving it in the Philippines? Here’s what you should keep in mind. 

What information is required to receive money? 

If the money must be physically collected in cash or transferred in person at a bank, the recipient need to provide a valid ID, preferably government-issued. The bank may also require a confirmation code for the transfer. 

Are there limits to how much you can receive? 

Generally, there are no limits. Just like you can send whatever amount you want, you can also receive any amount of money in the Philippines. However, there may be tax obligations on such a transfer once the money is received. 

In addition, certain reporting obligations may accrue if you are receiving over PHP500,000 ($10,134) or more in a single transaction or series of transactions.

What happens if I’m receiving over PHP500,000? 

Philippines’ Anti-Money Laundering Act imposes certain reporting obligations on banks for transactions of:

• over PHP500,000 within 1 banking day, made in cash or equivalent instruments; and
• over PHP1,000,000 which involve dealers in precious metals, jewelry or precious stones. 

Just like the US AML/CFT reporting obligations, these requirements are imposed to deter money laundering and financing of crimes. 

Banks are required to report transactions over this threshold within 5 days of the transaction. If there’s a flag on your transaction, your account may be frozen for 15 days, and you will be required to satisfy all queries before the freeze can be lifted. 

Not all transactions that meet this threshold will be subject to reporting though. The laws particularly target cash deposits and investments that have no underlying legal, trade or contractual justification. Generally, you may be exempt if:

• You are a properly identified customer of the bank and the transaction is normal, considering your business or financial capacity; or
• The transaction has a clear legal or trade origin, purpose or economic justification. 

Moreover, requirements of the Bangko Sentral ng Pilipinas on foreign currency and other foreign exchange-denominated bearer monetary Instruments declaration must be duly complied with.

Must I pay tax on money received from overseas?

There are two main types of tax that may be applicable to money received from overseas in the Philippines. 

If the money was sent as a gift, Donor’s tax of 6% may be applicable, but only if the amount is above PHP250,000. If this obligation is triggered, you will be required to file BIR Form 1800. However, gifts to charities and certain other gifts may be exempt. 

If the money was earned as income, you may be required to pay income tax anywhere from 15% to 35% on personal income above PHP250,000.

Conclusion 

The rules that govern international money transfers can often be complicated, but with the information here, you can at least begin to understand what to expect. As a rule, if you are sending a large amount of money, it makes sense to speak with a professional first. This way, you avoid surprises that may turn out to be too expensive.