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Is a TransferWise exchange a 'Remittance'?

Is a TransferWise exchange a 'Remittance'?

Old Dec 23rd 2021, 6:51 am
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Default Is a TransferWise exchange a 'Remittance'?

Many of you are probably familiar with the online money exchange service named 'Wise'. This company was previously name 'TransferWise' but they recently dropped the 'Transfer' part of the name.
I've used them for years and found them to be 100% reliable and trouble-free. Their exchange rates beat the banks by a good margin, and they are fast. Nice simple web interface makes the process easy. I intend to continue using them.
But a thought has just struck me.
They operate by maintaining bank accounts all around the world, and when you make a transaction they don't actually 'send' money from A to B (through the SWIFT system for example), but rather they make a local transfer in the country of destination, from their local bank (in the requested local currency) to your local bank in that same country.
So - technically - it seems to me there is no actual 'remittance' involved! Lets say you want to send GBP from your UK bank account to your Malaysian bank, exchanging to Ringgit. With 'Wise' you are transferring your GBP to THEIR UK GBP bank account. They then deposit the pre-agreed amount of Ringgit from THEIR Malaysian bank account to YOUR local Malaysian account, in Ringgit.
As you can see - no money has crossed any borders! There has been no 'remittance', at least not by you!

I actually wonder if this could be the reason they dropped 'Transfer' out of their name. Technically (and practically) I see NO (cross border) TRANSFER in this transaction.

What do you think folks? Is this the answer to our tax issue?
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Old Dec 23rd 2021, 8:34 am
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Default Re: Is a TransferWise exchange a 'Remittance'?

Is there any reason to think that a remittance of savings or capital gains arising in a foreign country brought in via Wise or any other means would be counted as income with the new tax regime?
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Old Dec 23rd 2021, 11:13 am
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Default Re: Is a TransferWise exchange a 'Remittance'?

Originally Posted by Flyguy View Post
I actually wonder if this could be the reason they dropped 'Transfer' out of their name. Technically (and practically) I see NO (cross border) TRANSFER in this transaction.
They dropped the "transfer" from their company name as they are expanding into other financial services. International money transfers was their core activity, but has meanwhile become only one of several activities. Unfortunately are those other services not yet available to customers in Malaysia.

The funds which are being transferred by them are formally not in their possession, but remain your possession. So technically speaking it is still you who is doing a remittance.
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Old Dec 23rd 2021, 12:47 pm
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Default Re: Is a TransferWise exchange a 'Remittance'?

Originally Posted by Epicurious View Post
Is there any reason to think that a remittance of savings or capital gains arising in a foreign country brought in via Wise or any other means would be counted as income with the new tax regime?
Maybe I haven't read the new rules closely enough yet - does it actually specify INCOME remitted, rather than ALL monies remitted?

Originally Posted by SushiFan View Post
They dropped the "transfer" from their company name as they are expanding into other financial services. International money transfers was their core activity, but has meanwhile become only one of several activities. Unfortunately are those other services not yet available to customers in Malaysia.
Well they just introduced the Wise Debit Card to Malaysia this month, and that will definitely help with the spending of my foreign currency. I'm in the process of getting mine.

Originally Posted by SushiFan View Post
The funds which are being transferred by them are formally not in their possession, but remain your possession. So technically speaking it is still you who is doing a remittance.
I'm not sure how you figure that SushiFan. Their own website blog explains the process. It's actually nothing revolutionary (in spite of their claims). It's the very same principle the Rothschilds started with and built into an international banking empire. Money was held in multiple cities in local currency. When a Rothschild client deposited in country A, an 'IOU' was sent to the partner branch in country B. That credit note was just a message, it had no actual monetary value. A highwayman might steal it from the messenger en-route, but it would be worthless to him. There was no money transferred.

When I send money to the Wise bank in Europe it IS in THEIR possession, certainly not in mine. It in fact remains in THEIR POSSESSION in Europe. I get a payment from their partner bank in Malaysia, in recognition of a deposit I made in Europe. They send an IOU message to the partner bank here to pay me the funds I am due.
It doesn't go through the normal banking system.
The only question I have is how does Wise fund the payouts in Malaysia. But that's their problem, not mine.

Last edited by Flyguy; Dec 23rd 2021 at 1:04 pm.
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Old Dec 24th 2021, 12:12 pm
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Default Re: Is a TransferWise exchange a 'Remittance'?

Originally Posted by Flyguy View Post
Maybe I haven't read the new rules closely enough yet - does it actually specify INCOME remitted, rather than ALL monies remitted?
Although the initial announcement talked about all remitted monies, later clarifications specified which categories will be taxed and which not. Income (including salaries, pensions, dividends, rental income, ..) will be subject to tax, whereas savings, capital gains and some others are not.
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Old Dec 24th 2021, 6:03 pm
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Default Re: Is a TransferWise exchange a 'Remittance'?

Originally Posted by SushiFan View Post
Although the initial announcement talked about all remitted monies, later clarifications specified which categories will be taxed and which not. Income (including salaries, pensions, dividends, rental income, ..) will be subject to tax, whereas savings, capital gains and some others are not.
I haven't had the time to check that myself, but it seems somewhat akin to the Thai Elite Visa exemption, which states that income IN THE CURRENT YEAR will be taxed (but not that of the previous year).
I'm not sure how they make the differentiation, but basically, I guess if you make no remittance in a year but save up the money money and remit in the next year it is tax free (defined as Savings)?
Could be nothing of the sort.
This has all got to be clarified.

Typical Malaysian style meantime - make pronouncements, but do no actual diligence on the details. No clarity.
Sometimes this countries Government really pisses me off.
Happy Christmas!

Last edited by Flyguy; Dec 24th 2021 at 6:09 pm.
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Old Dec 30th 2021, 11:53 am
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Default Re: Is a TransferWise exchange a 'Remittance'?

Originally Posted by SushiFan View Post
Income (including salaries, pensions, dividends, rental income, ..) will be subject to tax, whereas savings, capital gains and some others are not.
There is no way for anyone to know from what source the money is being transferred, from income or savings. E.g. there is the same system to tax the foreigners in a similar program in Malta. When we asked a tax attorney there how would a tax office know from what source a remittance comes, we were told that every year we would talk to the gov taxation office and they will determine your pay. How much have you got?
Needless to say, we didn't like it at all.

We have a debit card and we can take cash out of an ATM here without a fee. The limit is USD1K per day. Not bad.
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Old Dec 31st 2021, 11:49 am
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Default Re: Is a TransferWise exchange a 'Remittance'?

Originally Posted by StillSearching View Post
There is no way for anyone to know from what source the money is being transferred, from income or savings. E.g. there is the same system to tax the foreigners in a similar program in Malta. When we asked a tax attorney there how would a tax office know from what source a remittance comes, we were told that every year we would talk to the gov taxation office and they will determine your pay. How much have you got?
Needless to say, we didn't like it at all.

We have a debit card and we can take cash out of an ATM here without a fee. The limit is USD1K per day. Not bad.
As Malaysia has decided to postpone the plan to tax foreign income remitted to Malaysia by five years, we can postpone this discussion as well.
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