The U.S. EB-5 investor visa program is the most popular visa and citizenship scheme in the world. The EB-5 program gets you a top tier passport at a fraction of the cost of competitors like Australia and Canada, and the returns on most of these investments have been solid. And, of course, it gets you the right to live and work in the United States.
But the U.S. EB-5 Visa program has been under fire of late. There have been a few scams reported this year and most of the money has been flowing into high-end real estate developments in New York and Miami. Democrats had hoped the EB-5 would bring cash and jobs into low income areas, but investors have decided to go with lower risk higher returning options (yeah, a real surprise).
Democrats have been trying to cancel the program for years, but Congress extended it through April 28, 2017 to give time for President Trump to weigh in. And we all expect him to be a friend to the EB-5 program.
Candidate Trump has spoken out against illegal immigration and countries not sending their best. The EB-5 program brings in high net worth individuals and has been used by real estate developers (like Trump) to get projects funded on the cheap.
The EB-5 visa program was used by Trump’s son-in-law Jared Kushner to fund a rental apartment complex in Jersey City, New Jersey (called Trump Plaza). This project brought in about $50 million, mostly from Chinese investors.
The minimum investment for the EB-5 visa is currently $500,000 in a poor area and $1 million throughout the United States. The amount hasn’t changed since 1992 and I expect it to increase to $800,000 and $1.2 million in 2017.
Bottom line is that the EB-5 program gives developers access to cash at very low interest rates in exchange for residency and citizenship for the investor. This, in turn, increases jobs and grows the local economy.
Most EB-5 investors give their cash to a real estate developer and hope for the best. What if you want to start your own business in the United States?
The EB-5 visa is available to anyone that wants to start a business here that will employ a minimum of 10 people. You’re not limited to real estate development projects. Any business with employees will qualify.
For example, buy two or 3 Pizza Hut franchises, open a gas station, or start an online business, and you qualify for the EB-5 visa. If you’re an entrepreneur, this version of the EB-5 is an excellent opportunity.
What many forget is that this means you must pay U.S. tax on your business profits and on your worldwide income! Not just the money you make in the United States, but on all income earned on any investment anywhere in the world. If you sell your business in China, you will pay U.S. tax on the gain. If you sell your vacation home in Colombia, you will pay U.S. tax on your profits.
Worldwide income tax applies to both green card holders (which you get immediately with the EB-5) and U.S. citizens. The U.S. Federal tax rate is about 30% and many states charge 10% more more.
So, you’re giving up 40% of your income for the privilege of living in the United States. Does the EB-5 visa still sound “cheap” compared to Canada and Australia?
There’s one way to get US citizenship through the EB-5 investor program without paying these taxes. If you setup an internet business in the U.S> territory of Puerto Rico, you can cut your business tax rate to 4% and pay zero on capital gains.
Because Puerto Rico is a US territory, US Federal immigration laws apply but US tax laws do not. The tax laws of Puerto Rico supersede the US tax code. Because of this hybrid legal system, you can immigrate to the United States through Puerto Rico using the EB-5 visa and qualify to live tax free under Puerto Rico’s tax laws.
If you apply for a U.S. green card and citizenship through Puerto Rico’s EB-5 program, you’ll pay 4% on corporate profits earned on the island (under Act 20) and zero on capital gains and foreign sourced income.
For this tax plan to work, you need to be a “resident” of Puerto Rico. A resident is someone who spends 183 days a year on the island. You can be anywhere in the United States for the remainder of the year.
By qualifying for Act 20, you will exchange the U.S. 40% tax rate for a business tax rate of 4%. This tax holiday is guaranteed for 20 years and the requirements are simple:
- The minimum number of employees required for Act 20 business is 5. However, to qualify for EB-5, you need 10. So, we setup an Act 20 company with 10 employees.
- The company must be providing a service from Puerto Rico to persons or companies outside of Puerto Rico. Internet marketing, call centers, import / export, sales teams, and any online business are good candidates for Act 20. Retail businesses, franchises and restaurants do not qualify for Act 20. They do qualify for the EB-5 visa, but not for the tax deal.
For more detailed information on Puerto Rico’s Act 20, see: How to Maximize the Benefits of Puerto Rico Act 20
The immigration benefits of the EB-5 program available from Puerto Rico are identical to the EB-5 programs available from New York, Florida or anywhere else in the U.S. Once complete, you’ll be a U.S. citizen with all of the rights and privileges of someone born in America. You’ll have a US passport and the right to live and work anywhere in the country.
The same is true of children born in Puerto Rico. Anyone born in Puerto Rico is a U.S. citizen, just as they are if born in a U.S. state. The only difference between Puerto Rico and the U.S. in this case are its tax laws.
I hope you’ve found this article on the EB-5 visa program helpful. For more information on immigrating to the United States through Puerto Rico, you can reach me directly at info@premieroffshore.com or by calling (619) 550-2743. All consultations are free and confidential.
