Overview of the 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. This conditional residency can be followed by an application for permanent residency in the country. The economic opportunities and the political freedom that the United States offers, make America a very attractive destination for investment immigrants.
Applicants must consider, however, the tax implications of becoming a permanent resident or citizen of the USA. The cost of residency through an EB-5 visa may prove very expensive, particularly if the applicant has enjoyed other emigration options outside of the United States.
Applicants rarely give serious consideration to the tax implications of becoming an American resident, as other financial and economic factors are usually given more importance when investment immigration options are being analyzed. Investors often ignore the potential hefty tax implications of eventually forfeiting American residency or citizenship after having successfully obtained the EB-5 visa.
Furthermore, the stringent American legal 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 situation becomes stable again, often end up learning about these 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. Read ahead for an analysis of the tax risks that an investor immigrant is exposed to after becoming a taxed 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 settling in high-tax states like New York or California, the total tax liability may be far too high to be easily ignored.
While the EB-5 investment immigration visa offers numerous benefits and advantages to high net worth individuals seeking American residency, investment immigrants cannot afford to ignore the implications of becoming a taxed 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 a 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 making a final decision.
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