Foreign nationals pursuing American legal permanent residency, commonly known as Green Card holders, must consider several challenges. These issues are: EB-5 investors face the risk of fraudulent or mismanaged projects. However, recent reforms will reduce this risk by increasing USCIS oversight of regional centers. It will discourage fraudulent activity and increase the chances of a successful investment.
Many people, including EB-5 investors, are surprised to learn that the U.S. government requires them to pay taxes. It is particularly true if the person has a job in which they have income tax withheld from their paycheck. In addition, even if they reside overseas and do not collect wages from the U.S., they may still be required to file a tax return if the IRS determines they have a “substantial presence” in the United States. For tax purposes, the IRS defines “substantial presence” as being present in the United States for more than 31 days a year. To meet this requirement, the person must be in the United States for at least 183 days during the current year and the two previous years. In addition, to count these days, the IRS rules require that you be physically present in the United States for at least eight hours each day.
Generally, green card holders are considered U.S. tax residents from the day they receive their green cards. As such, they must report all domestic and international income to the IRS. Additionally, they must comply with the Foreign Account Tax Compliance Act, which requires them to report any assets they hold in other countries. It is one reason why it is essential for potential EB-5 investors to carefully consider which immigration option will be best for them long term, particularly regarding their taxation status.
The EB5 investment projects offer a path for international investors to gain lawful permanent residency (LPR) in exchange for investing capital in the country. The investor and their family can live permanently in the U.S. with this visa. Each year, the government allocates a set number of immigrant visas to foreign nationals who wish to invest in U.S. businesses that will generate economic jobs. However, the number of citizens from certain countries exceeds this number yearly and becomes “oversubscribed.” To avoid being caught in a visa backlog, applicants must conduct due diligence on projects or regional centers they plan to invest with before applying for the EB-5 visa. Once an investor obtains a conditional green card, they are required to fulfill specific requirements to become a U.S. citizen in the future. It includes demonstrating a continuing investment, proof of employment, and creating or preserving at least ten full-time jobs in the United States. Applicants should be aware that they can change their status to citizenship once USCIS adjudicates their I-829 petition and they have satisfied the two-year requirement.
In addition to fulfilling these requirements, LPRs must pay income taxes similarly to U.S. citizens, and they cannot engage in some activities reserved exclusively for citizens, such as voting or serving in the armed forces. In addition, they must have been a lawful permanent resident for five years if they obtained their visa through marriage to a U.S. citizen or three years if they obtained their visa through entrepreneurship or business investment.
Due diligence is a detailed check of an individual or company to see whether they are connected with forms of economic crime such as money laundering and fraud. This type of check is required by law in many countries and is usually carried out before significant transactions such as buying real estate or opening bank accounts. The United States and other nations have strict rules for fighting financial crime and regularly approve directives requiring more stringent Due Diligence checks. These regulations are designed to prevent money laundering and terrorism financing. They include requirements for companies to check whether investors are sanctioned persons and that they have a legal source of funds.
It requires a lot of research and paperwork. The process can take months, especially when several investors are involved. Having well-prepared due diligence binders can speed up the process, as investors can review the binder when they are ready to invest. It’s also helpful to have a dedicated person to coordinate the process, keep track of information and translate documents when necessary. Investors pursuing their EB-5 visa hire a broker-dealer agent to conduct the EB5 due diligence on behalf of the investor. These agents are experienced in this process and can offer a variety of projects for the investor to choose from. They also need to learn how to interpret and comply with the regulations, which can be difficult for someone unfamiliar.
In the United States, investors seeking permanent residency via investment can do so through the EB-5 or E2 visa programs. The EB-5 offers a pathway to citizenship through a substantial investment and is the most common route for investor-based permanent residence. Each year, the U.S. government allocates 140,000 visas to individuals who wish to enter the country for employment based on their investment in commercial enterprises that benefit the U.S. economy and create jobs. This category of visas is known as the ‘Employment Fifth Preference’ immigrant investor program (EB-5). Once a foreign national has invested $800,000 or more in a new commercial enterprise associated with one of the government-approved regional centers and fulfilled all other EB-5 requirements, they will receive their permanent green card and be granted lawful permanent resident status for themselves, their spouses and children under the age of 21.