Key Points

Republicans in the House have added a 5% remittance tax to the budget bill going through Congress. Most of Remitly's business comes from the U.S. It's not fully clear how Remitly will be affected, or if the bill will pass. 10 stocks we like better than Remitly Global ›

Shares of Remitly Global (NASDAQ: RELY), the tech-forward remittance specialist, were pulling back today due to talk in Washington about a possible remittance tax as lawmakers look for ways to dissuade immigrants from sending money out of the country or collect a fee on those transactions.

As a result, Remitly was down 4.3% as of 12:23 p.m. ET.Image source: Getty Images.

What's the remittance tax about?

House Republicans are proposing a 5% tax on international money transfers out of the U.S. made by noncitizens as part of the current budget bill going through Congress. The proposal has President Trump's endorsement as well.

It's unclear if the tax will be included in the final bill, but it could take a bite out of remittances sent to home countries, and act as a disincentive for immigrants, who send billions of dollars back to countries like India, Mexico, and the Philippines.

Remitly facilitates remittances all around the world. It's active in more than 170 countries and has 5,200 "corridors," meaning transfers can be sent from one country to another.

It earns revenue by taking a cut of those transfers. In the first quarter, it earned revenue of $361.6 million on send volume of $16.2 billion, giving it a take rate of 2.2%.

How much will Remitly be impacted?

In 2024, 65% of Remitly's revenue came from the U.S. so it would be significantly exposed to any change in U.S. remittance policy.

For now, it's unclear how the tax, if imposed, would affect it, or how it would be paid. It's possible that Remitly could be involved in facilitating the payment of such a tax as well. Additionally, 5% is a relatively modest rate and may not do much to change remittance behavior.

Keep an eye on the bill as it goes forward and any response from Remitly, but for now, this isn't a reason to change your investing thesis.

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Jeremy Bowman has positions in Remitly Global. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why Remitly Global Stock Was Sliding Today was originally published by The Motley Fool

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