So what is the investor ’ s risk ? Simply put , the EB-5 visa specifically designates an investor ’ s intention to permanently reside in the United States , first by declaration to USCIS under her two year conditional green card , then prima facie under her permanent green card . If an investor receives her conditional green card within two years of the initial filing , her permanent green card about three years later , and then continues to reside in the United States , it is hard to imagine what evidence she could present to support her case that she is not a U . S . domicile and not subject to worldwide U . S . estate and gift tax on her total worldwide assets . What evidence would the IRS believe as credible under an IRS audit ? As an IRS audit expert , I would be hard pressed to make a convincing case that EB-5 investors residing in the United States do not have an intention to permanently reside in the country , especially since such testimony is generally given to support their conditional green cards , and is prima facie evidence once they receive their permanent green cards .
In the case of EB-5 investors , it seems that their immigration interests and tax-minimization interests are in direct opposition ; the very same evidence that the investor must prove in order to obtain her green card is what will ultimately also prove her to be a U . S . domicile , and hence , subject to U . S . estate and gift tax . Though the EB-5 investor may not be able to avoid domicile classification if she hopes to protect her immigration interests , much more goes into tax considerations than simply looking at U . S . domicile status ; if the investor is to be truly prepared , she must also consider tax treaty issues and comprehensive tax planning .
Tax treaties and U . S . estate and gift tax
It is important for EB-5 investors to engage tax experts because , in many cases , there is a bi-lateral tax treaty issue at play . When dealing with international tax issues , there is a series of important questions that must be addressed : Is the investor a citizen or an estate / gift tax resident of another country ? Does that country have a tax treaty with the United States ? If so , what about the investor who is a citizen of a foreign country , but is also a U . S . domicile ? Under the treaty rules , both governments would examine the investor ’ s family , social , and business connections to each country , including where her permanent home is located , where her vital interests are centered , where her habitual abode is located , and in which country she holds citizenship . With this information , the countries would apply the treaty tie-breaker rules to determine which country imposes the estate and gift tax . Another important consideration is whether there are tax credits available for taxes paid in one country if the second country has a higher tax rate .
Pre-immigration tax planning
If investors are tax conscious , pre-immigration tax planning can go a long way in determining what taxes are appropriate for an EB-5 investor to pay . There are some strategies that can help EB-5 investors minimize their tax liability , while still fulfilling their duty as permanent residents . For example , investors can work with their advisors to establish an offshore trust in a reputable jurisdiction with an established banking system , infrastructure , “ secrecy laws ,” and favorable asset protection legislation . The trust should be irrevocable and non-amendable so the trust assets will not be subject to U . S . estate tax ( i . e . the trust assets would not be included in the U . S . estate for estate and gift tax purposes ). Advisers can also assist investors in planning the best way to bring their funds to the United States . In one such strategy , investors should establish non-U . S . accounts in the ( non-domiciliary ) investor ’ s name , and transfer funds to it . Next , they should have a U . S . donee ( someone who will receive the investor ’ s gift ) set up a non-U . S . account in the donee ’ s name and make gifts from the investor ’ s non-U . S . account to the U . S . donee ’ s non-U . S . account . The U . S . donee may then wire transfer funds from their non-U . S . account to the U . S . donee ’ s U . S . account . Another consideration for non-domicilaries who own stock in a U . S . corporation is to gift the stock while alive so there will be no U . S . estate tax upon death . The non-domiciliary ’ s gift of U . S . stock is U . S . gift tax free .
The wealthiest of investors ( i . e ., those with assets totaling over $ 10.5 million ) should use the funds in their offshore trusts to purchase U . S . life insurance policies ( after they get their green cards ), ensuring that the offshore trust is the owner and beneficiary of the U . S . life insurance policy . If they purchase the policy before they get their green cards , there is a 30 percent U . S ./ NRA withholding tax on the life insurance policy proceeds paid on the death of the insured . If they establish the “ pre-immigration trust ,” and fund it before they move to the United States , they hit the “ tax trifecta ”: no U . S . gift tax on funding the trust , and no U . S . estate or income tax on the life insurance death benefit proceeds .
representing foreign investors since 1996
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