Are you thinking about becoming a US citizen or resident through the EB-5 or E-2 visa programs? Do you know that all residents, green card holders, and citizens must report their foreign holdings and pay US tax on their worldwide income? That the corporate tax rate in the US is 35% Federal plus about 10% to your State?
Are you ready to give up 45% of your income in exchange for living in America? If not, this article is for you. I will show you how to become a US citizen or resident using the EB-5 visa and E-2 visa programs and pay (near) zero tax to the US government.
Here’s how to get the benefits of being in America without paying for them.
First, a few words on how to become a US citizen or resident using the E-2 visa or the EB-5 visa.
The EB-5 investor visa requires you start a business in the United States with at least 10 employees. The minimum investment amount is usually $1 million.
The EB-5 program gets you a green card immediately and US citizenship in 5 years. You have 2 years to grow the business to 10 employees.
Under this program, you can invest in a business that creates 10 jobs. You are not required to operate the business… at least not day to day. You can also invest in a business and save 10 jobs that would have otherwise been lost.
The EB-5 program requires a very thorough background check. Processing can be 12 to 18 months. But, your US citizenship is guaranteed if you fulfill the terms of your agreement. There are no conditions or quotas
The E-2 visa program is the EB-5 program lite. You get residency, but no green card and no path to citizenship. You need to start a business with a “reasonable number of employees” (usually 5 or fewer), and processing can be completed within 1 or 2 months.
- It’s possible to apply under E-2 to gain access to the US and then upgrade to the EB-5.
Any income earned in this business will be taxed by the United States. In fact, all income from all sources will be taxable in the US. Also, you must begin reporting all business interests, domestic and abroad, to the Internal Revenue Service.
As EB-2 and E-2 visa applicants tend to be successful persons in their home country, being taxed on your worldwide income can become a major expense. Is it worth it to live in America? Is there a way to reduce or eliminate US taxation for your EB-5 business or E-2 company?
Yes there is. Here’s how to become a US citizen or resident using the EB-5 or E-2 visa programs and pay almost no tax.
The US territory of Puerto Rico has a tax holiday. If you start a business with a minimum of 5 employees, which offers a service to persons or companies outside of Puerto Rico, that business will pay only 4% in tax. This tax holiday is guaranteed for 20 years.
Next, if you spend 183 days a year on the island, own a home there, and are a legal resident of Puerto Rico, you pay zero capital gains tax.
The Puerto Rico business tax holiday is called Act 20 and the personal tax holiday is called Act 22. Combine these laws by living in and operating a business from Puerto Rico and your effective tax rate is near zero.
I note that anyone living in Puerto Rico is a US resident, but they are not subject to US taxation. Travel between Puerto Rico and the US is a domestic flight with no immigration checkpoints. You immigrate or enter the US through Puerto Rico.
Because Puerto Rico is a US territory, you may setup your EB-5 visa or E-2 visa qualified business on the Island. In fact, Puerto Rico is a “distressed zone” for the EB-5 program. This lowers the investment from $1 million to $500,000.
- Much of Puerto Rico is a Federally approved Targeted Employment Area (TEA). Also, there is a Federally licensed TEA Regional Center in Puerto Rico to facilitate this setup.
An EB-5 visa business in Puerto Rico must have 10 employees. An E-2 visa business on the island must have 5 employees. 5 is the minimum number for Act 20, so it applies to the E-2 visa. The EB-5’s 10 employees trumps Act 20’s 5 employee minimum.
By combining the EB-5 visa or the E-2 visa with Puerto Rico's Act 20 you can start a business, gain residency or citizenship, and pay only 4% in taxes on your Puerto Rico source income. This is an amazing opportunity for anyone who wishes to gain access to the US as an entrepreneur.
As an investor under the EB-5 program, you and your immediate family (your spouse and unmarried children under 21 years) are eligible for Green Cards.
Once you complete the EB-5 visa program, you and your family are eligible for U.S. citizenship through naturalization. The EB-5 visa takes away both the waiting time and the quota system that many immigration programs are renowned for. Once you and your family acquire U.S. citizenship, you are entitled to all the rights and privileges (and a US passport), just like any other US citizen.
I hope you have found this post helpful. For more information on combining the EB-5 visa or the E-2 visa with Act 20 in Puerto Rico, please contact me at firstname.lastname@example.org or call us at (619) 550-2743.
For more information on Puerto Rico, see:
- Blood in the Streets Tax Planning
- Puerto Rico Tax Deal vs Foreign Earned Income Exclusion
- Offshore Inversion in Puerto Rico
- Puerto Rico Tax Deal for Corporations