Declaring Taxes on Gift Proceeds for an EB5EB5 Visa Primer

The EB5 visa is designed for foreign investors who want to invest a substantial amount of capital into the U.S. economy in exchange for the chance to live and work in the U.S.  The amount invested must be at least $500,000 in select markets, at least $1,000,000 in all others, and must create at least 10 jobs within two years of being invested.  Stipulations of the program state that any money invested must remain “at risk” – in other words, the investor can’t have a guarantee that, should funds be lost, they will be replaced.  If that were the case, it would not be an investment in the U.S. economy, but a loan, which is not the purpose of the program.  When the required funds have been or are in the process of being invested, the investor can be issued a provisional EB5 visa.  If the investment does not create the required amount of jobs or substantially grow the venture within the time that a provisional visa has been issued for, the visa may be revoked and the prospect of a permanent EB5 visa taken off the table.

 Raising Funds for an EB5

The EB5 visa is a real win / win for everyone involved.  The foreign investor gets his or her own chance at the American dream, and the U.S. economy gets an infusion of cash and the prospect of new jobs.  However, not every prospective foreign investor will have half a million to a million dollars of free cash in their bank accounts.  This is why, for the purposes of the EB5 visa, foreign investors are allowed to raise funds from foreign friends and family members in order to have enough cash to meet minimum investment requirements.

 Taxation Issues

The United States generally taxes cash that is gifted from one person to another.  However, U.S. tax laws are very complicated and constantly changing.  Several factors will affect whether or not funds raised by a foreign investor outside of the country can be taxed as a gift when those funds are invested in America’s economy.  Whether or not the gifter of the funds is an American citizen or resident, whether or not the gift was made before or after the giftee was on U.S. soil, etc.

For the best and most up to date information regarding current U.S. tax requirements, a U.S. based accountant or tax attorney should be contacted.

If taxes do need to be paid, the tax or accounting professional can help the foreign investor in ensuring the proper amount of taxes are paid and that they are paid on time.  In the U.S., anyone who pays taxes must have either a social security number or a taxpayer ID number (TIN).  Since the foreign investor won’t have a social security number, he or she will need to register for a TIN – which can also be done through an accounting or tax professional.

Before investing any cash in the U.S., a foreign investor should ensure that he or she understands the tax process, because the U.S. Internal Revenue Service (IRS) won’t hesitate to send a tax bill to any foreign investor who either fails to pay taxes in full or at all. For more information contact an experienced EB5 attorney at MC Law Group.