The USA EB-5 Immigrant Investor Program
For those who wish to acquire permanent resident ("Green card") status, the EB-5 Immigrant Investor Program is the most efficient way to acquire such status. Since 1990 when Congress created this program, each year, the US government allocates a substantial number of visas for individuals who wish to make a significant investment in a new commercial enterprise in the USA. Under this program, individuals, and their immediate family members can become permanent residents of the US within a short period of time.
The EB-5 program requires that a foreign individual invests US$ 1 million or USD 500,000 if the investment is made in a rural area or an area with high unemployment into a new commercial enterprise and create 10 new full-time jobs. Funds must stay invested and be at risk until permanent resident status is granted (usually about 4 years).
For several years now, the EB-5 program has only been renewed by Congress on an ad hoc basis. Once again this year, there was political wrangling around the program's renewal. Again as in past years, it has been extended until December 2016 on a temporary basis to allow Congress more time to consider the long-term future of the program. Accordingly, if you think this program is for you, you must contact us immediately to take advantage lest the program expires before you can file.
Regional Center Program
A certain number of visas are set aside for individuals who apply under the Regional Center Program. There are a number of designated "Regional Centers" in the USA, each with its own distinct industry and geographic focus. Under this program, applicants usually invest USD 500,000 into one of the designated Regional Centre projects, thereby becoming a limited partner in that Regional Centre's new enterprise.
The main benefit of this option is that investors may rely on indirect job creation rather than directly hiring ten employees. Moreover, the day-to-day management of the investment is facilitated by the Regional Centres so that the applicant is free to live and work anywhere in the USA.
There are no requirements as to age, language or past business experience in order to qualify. Applicants, however, must have a net worth in excess of USD 1 million and proof must be provided that their funds come from legal sources. Furthermore, one must remain in the USA for at least 180 days each year until unconditional green card status is granted if the applicant wishes to apply for U.S. Citizenship.
Haskew Law can advise and assist international clients with the selection of the most suitable Regional Centre, and handle EB-5 applications.
Alternatives to Green Card May Be Preferable
However, for wealthy individuals and families, in particular from the taxation point of view, permanent resident/green card status may actually be worth avoiding. There are many different possibilities to acquire a work permit in the US which does not subject its holder to global taxation. Possible suitable categories include for example L-1 intracompany manager executive transfers or E-1/2 treaty investor/trader visas, (E Visas can normally be renewed indefinitely). Also often a simple long-term visitors visa may be the appropriate solution if you would like to spend a certain amount of time in the USA but not become subject to worldwide taxation.
After five years of legal residence from the date of receipt of Conditional Green card, it is possible to acquire US citizenship and to obtain a passport which gives the protection - but also the taxation - of the most powerful country in the world. There are four ways to acquire US citizenship: by birth in the United States or in US territories (Jus soli), by birth outside the US to US parents, and by naturalisation.
Real Estates in the United States
The United States ordinarily places no restrictions on foreigners concerning the ownership, purchase or transfer of real estate, except where national security is at stake. A foreigner's right to own, purchase, or transfer real estate may be limited, however, by various federal and state statutes that restrict the ability of a foreigner to acquire or dispose of certain real estate or to make testamentary dispositions to foreigners from countries that prohibit similar dispositions to U.S. citizens. Also, there are numerous reporting requirements for foreign investors as well as for sellers of real estate to foreigners. The reporting requirements incorporate look-through mechanisms which make it relatively difficult to set up tiers of domestic and foreign entities in order to make the ultimate ownership of real estate by foreign persons more private. Furthermore, failures to report may be punished with severe penalties, ranging from up to 25% of the fair market value of the real estate even to imprisonment.
Estate and tax planning for U.S. real estate
The main issue with regard to tax and estate planning is represented by the U.S. estate and gift taxes, which generally apply to foreign transferors who have property located in the United States, in addition to citizens and residents of the United States. For foreigners, the gross amount subject to U.S. estate tax can be determined only by reference to property situated in the United States. In contrast, for U.S. citizens and residents, any U.S. estate and gift tax exposure is determined by reference to personal status and not to the specific location of assets.
A further issue is that a transferee of U.S. real estate from a foreign person is required to deduct and withhold 10% of the amount realised by the foreign person in the disposition.
However, these taxes may under certain circumstances be avoided by holding U.S. real estate through a U.S. company incorporated in the state in which the real estate is located, and which in turn is held by a foreign company incorporated in a suitable jurisdiction.
Avoid U.S. taxes on worldwide income
Most individuals would probably not wish to become subject to U.S. taxes on their worldwide income, and for them it is very important to observe the clear rules as to when a foreigner becomes resident for tax purposes in the U.S. Assuming adequate immigration status, up to an average of 120 days can be spent in the United States without residency status there being established for U.S. income-tax purposes. Under the substantial presence test, a foreign citizen is treated as a U.S. resident alien if that individual is present in the United States for at least thirty-one days during the current calendar year and for a total of 183 days during the current year and the two preceding calendar years. In determining whether this 183-day requirement has been satisfied, the days are counted differently, depending on when the physical presence in the United States occurred. Each day of presence during the current year is counted as a full day. Each day in the first preceding year counts as one third of a day. Each day during the second preceding year counts as one sixth of a day.
There is an important exception to this general rule, in addition to the possible applicability of a tax treaty. If a foreigner is present in the United States for fewer than 183 days in a calendar year, and has a tax home in another country and a closer connection to that country than to the United States for that calendar year, the foreigner is not considered a resident of the United States for income tax purposes for that calendar year. This exception, known as the "Tax Home/Closer Connection Exception," defines "tax home" as the individual's principal place of business. The Tax Home/Closer Connection Exception is not available to a foreigner who has taken steps to become a lawful permanent resident of the United States. This Exception allows foreigners to reside in the US in a given year for longer than the days allowed under the "cumulative presence" test, so long as they are present in the country for less than 183 days in that year.
Advice on acquisition of U.S. real estate
The acquisition of real estate abroad requires careful and professional planning. Every day, individual clients as well as other law and consulting firms worldwide rely on us for specialised advice in this area. No matter how complex your needs are, Haskew Law will be able to advise and assist you. Contact us today for individual advice and comprehensive, yet cost-effective solutions regarding the acquisition and holding of real estate in the United States.
For more information contact us to book a private consultation