Overview of Tax Implications of Gaining Permanent Residence through the US EB-5 Visa
EB-5 Visas allow foreign entrepreneurs and business owners to acquire conditional residency in the United States of America, which can be followed by an application for permanent residency in the country. The economic opportunities and the political freedom that the United States offers makes it a very attractive destination for investment immigrants.
However, applicants must consider the tax implications of becoming a permanent resident or citizen of the USA. The cost of residency through EB-5 visa may prove very expensive, particularly if the applicant enjoys other emigration options without becoming a permanent resident or citizen of the country.
The tax implications of becoming an American resident are rarely given serious consideration. Other financial and economic factors are given more importance when investment immigration options are analyzed. Investors often ignore the tax implications of forfeiting residency or citizenship in the future after having successfully obtained the EB-5 visa.
Further, the stringent norms related to foreign bank reporting and compliances, which involve both civil and criminal penalties, may make the EB-5 visa look distinctively unattractive.
Investment immigrants who merely seek US residence as a short-term option until their domestic economic or political setup becomes stable again often end up learning more about the harsh tax implications only after successfully gaining residence in the USA.
Of course, the question of tax implications does not arise for an immigrant who seeks to reside in the USA for patriotic reasons, or for reasons related to political freedom. For such persons, the rationale applicable to foreign business owners who merely seeks the freedom to visit the USA for personal and commercial reasons is simply not relevant. Read ahead for an analysis of the tax risks that an investor immigrant is exposed to after becoming a tax resident of the USA, along with an overview of options other than the EB-5 visa that are available to immigrants.
Implications of Tax Residency in America
The USA is one of the few countries that taxes global income of all its residents and citizens. High net-worth residents and citizens are liable to pay Federal gift and estate taxes on all their assets situated all over the world. For immigrant investors setting in high-tax states like New York or California, the total tax liability may be far too high to be easily ignored.
While there is no doubt that the EB-5 investment immigration visa offers numerous benefits and advantages to high net worth individuals seeking a Green Card, investment immigrants cannot afford to ignore the implications of becoming a tax resident in the United States of America. The EB-5 visa holder will be subject to a rigid and onerous system of taxation of income and assets, will have to comply with detailed compliance rules relating to FBAR, and will be required to pay an expensive exit tax when relinquishing permanent residence or citizenship.
For investors who do not wish to become subject to such tax laws, business immigration visas like L1, E1, and E2 can prove to be viable alternatives. These visas can also help the individual gain better understanding of the US taxation system before taking a final decision on permanent residency. Those who intend to continue with the application for the EB-5 visa should consider all existing and future tax implications, including the exit tax applicable at relinquishment, before taking a final decision.