What is EB-5 VISA? And What is your tax responsibility as a EB-5 VISA Holder?
Overview of the EB-5 VISA Program:
The EB-5 VISA is program created by the Congress in 1990, which grants an EB-5 VISA holder to conditionally becoming a permanent resident aliens of the United States of America. To obtain a EB-5 VISA, the foreign person must invest in the following categories:
– Create a new commercial enterprise
– Invest in a troubled business.
– Invest in a designated Regional center
To Create a New Commercial Enterprise:
Minimum Investment: USD $1,000,000 or USD $500,000 in targeted employment areas
Minimum Job creation: 10 Direct jobs
Minimum Participation: Active Participation
Invest in a Troubled Business:
Minimum Investment: USD $1,000,000 or USD $500,000 in targeted employment areas
Minimum job Creation: Maintain the number of jobs at no less than the pre-investment level for a period of at least two years.
Minimum Participation: Active Participation
Invest in a designated regional center
Minimum Investment: USD 1,000,000 or USD $500,000 in targeted employment areas
Minimum Job Creations: 10 jobs direct or indirect
Minimum Participation: Investment only
The purpose of the EB-5 VISA program is to help the foreign persons become a lawful permanents resident aliens in a shorter amount of time versus obtaining resident status through other avenues. In Return, the foreign person will help stimulate the economy and create job opportunities in the United States by investing a certain amount of the U.S. The program has been extended until September 2015.
What are the U.S. Tax Responsibility?
EB-5 investors receiving distributions from a project in a Regional Center or by virtue of their investment in a new commercial enterprise are generally subject to withholding tax until they become a conditional permanent resident in the United States either through consular processing of their immigrant visa
abroad or through adjustment of status to a conditional permanent resident (if in the United States in another lawful immigration status).
If you are in the United States, you may be subject to US income tax based on substantial presence test. Substantial presence test is based on the number of days the person was physically in the United States.
Once EB-5 investors become a conditional permanent resident in the United States, they are subject to federal income tax on their worldwide income and subject to foreign asset reporting requirements. This includes sources of income in the United States and sources of income outside the United States, it doesn’t matter where the income was earned once you become a U.S. Person. The income could be from the moon, mars, etc the investor must report the income on their 1040.
However, foreign tax credit & exclusions may be available on income that is taxed outside the United States if the US has an income tax treaty with an investor’s home country. Certain countries do not have income tax treaties with the US.
As mentioned before, once a EB-5 investor become a permanent resident, the investor is also subject to Foreign Asset reporting, such as:
FINCEN 114 – Reporting of foreign bank accounts (Ex. Bank Accounts, Cash surrender Insurance Policy, Fixed Deposits, Provident Funds, etc). Due Date June 30th.
IRS Form 8938 – Statement of Foreign Specified Assets.
IRS Form 5471 – Information Return of U.S. Persons with Respect to Certain Foreign Corporation.
IRS Form 3520 – Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.
IRS Form 3520-A -Disclosure of transactions with a foreign trust.
IRS Form 8621 – Information Return by a Shareholder of a Passive Foreign Investments Company or Qualified Electing Fund.
IRS Form 8865 – Disclosure of interests in certain foreign partnerships; filed with U.S. tax return
EB-5 investors are also subject to other types of taxes, such as estate, gift, and generation-skipping transfer taxes. State taxes may also apply.
Modi CPA is a licensed Certified Public Accounting firm in the state of Texas in The Colony, TX and service clients in the DFW Metroplex area (Dallas, Addison, Lewisville, Plano, Garland, Forth Worth, Arlington, Richardson, McKinney) and throughout the United States. Furthermore, we are also International & Cross-Border Tax accountants whom look at US-Canada Tax Treaty, US-India Tax Treaty, US-Russia Tax Treaty, US-UK Tax Treaty, US-Egypt Tax Treaty, and others.
We are a qualified accounting firm to discuss Domestic, Cross Border Tax issues between multiple countries, and other International tax services to ensure your compliance with the United States’ International tax laws. Do not hesitate to contact our office should you have further questions. Our Phone number is (214)618-0468 and email is ravi@modicpa.com