Another EB-5 Visa Scam

Another EB-5 Visa Scam

01/03/2017 - 11:37 AM
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EB-5 visa scam

The EB-5 visa program is fraught with fraud and under fire from Democrats in the U.S. Congress. I expect it to survive, but problems will continue to plague the program. Here’s why and what you can do to protect yourself.

First, a brief review. The U.S. EB-5 visa program promises high net-worth foreigners a green card in exchange for an investment of $500,000 to $1 million depending on where the investment or business is located. After 5 years of residency, you’re guaranteed citizenship and a passport.

Most of the money for EB-5 visas has come from Chinese investors. In fact, 84% of U.S. visas issued under the EB-5 program are to Chinese nationals.

There are two ways to use the EB-5 visa program. You can start a business or invest in someone else’s project. The only requirement is that the businesses must hire 10 employees. The purpose of the EB-5 program is job creation.

It’s that second option, investing in another person’s project or business, where the risk of fraud comes in. I’ve been warning about this for years, but investors continue to be scammed and robbed by unscrupulous promoters.

The most recent EB-5 visa scam hit us at Premier very close to home… literally.

Here’s the story:

As reported in the Los Angeles Times, the SEC alleges that Orange County lawyer Emilio Francisco misspent at least $9.5 million from 131 investors who wanted to participate in the federal EB-5 visa program. Apparently, he diverted cash from Chinese investors to support his business and buy a yacht.

This likely means that the investors have lost their money, their green cards, and their residency status. Because the money wasn’t used to build a business, it’s safe to assume Mr. Francisco can’t afford to hire 10 employees for each investor and keep them employed for 5 years until his clients receive their passports.

Mr. Francisco promised to build assisted living facilities and restaurants under the name Cafe Primo throughout Southern California. He built a few Primo’s, but no assisted living units.

And here’s why it hits close to home: Our office is in a building in San Diego with one of the few Cafe Primo’s that was actually built out and operational. Primo’s was where we’d meet for lunch to plan our publishing schedule, gather for a beer or three after work, and watch NFL games.

I was basically sitting above Cafe Primo when I wrote my most recent article on EB-5 visa fraud. The coincidence is amazing…

Coincidence aside, the EB-5 visa scam is relatively common. The U.S. government has indicted about 10 groups of promoters in the last 2 years. Based on the various court filings and news reports, hundreds of millions of dollars has been lost to fraudsters.

There’s only one way to avoid the EB-5 visa scam – start your own business in the United States. Don’t rely on a promoter or bet your future on the success of a large real estate development. Set up a small business with 10 employees and do it yourself.

We at Premier offer a very unique version of the EB-5 visa. One that eliminates U.S. tax on your business and on your worldwide income.

  • Once you have a green card, the U.S. will tax your worldwide income. The only way to avoid this is with pre-immigration tax planning and the option described below.
  • Most EB-5 visa applicants pay about 35% in Federal taxes and 7 to 12% in state taxes on their worldwide income.

Here’s how to qualify for the EB-5 visa and cut your tax rate down to 4%.

U.S. Federal taxes apply to U.S. citizens no matter where they live. Americans in every state pay Federal taxes. American’s living abroad pay Federal taxes.

The ONLY exception to U.S. Federal income tax is found in the U.S. territories. Federal tax law does not apply in the U.S. territories. Each territory has its own tax code which superseeds the Federal code.

And the U.S. territory of Puerto Rico has a tax deal you can’t refuse: start a service business with 5 employees on the island and pay only 4% corporate tax on your profits. If you live on the island, you’ll pay zero Federal income tax on your capital gains and dividends from your Puerto Rico company.

As a territory, the island’s tax laws trump Federal tax law. But, U.S. immigration law applies, thus the EB-5 visa program is available (and thriving). I should also note that anyone born in Puerto Rico is a U.S. citizen, just as they are when born in a state.

When we combine Puerto Rico’s tax laws with the EB-5 visa program, we get a service business with at least 10 employees operated from Puerto Rico. A business that’s providing a service from Puerto Rico to persons and companies outside of Puerto Rico.

  • Puerto Rico’s tax law required 5 employees, but the EB-5 program required 10.

Using Puerto Rico’s tax laws and the EB-5 visa program together, you have a business paying only 4% in tax and a green card. You can immigrate to the United States, stay as a resident for 5 years, and be guaranteed citizenship and a passport… all without paying U.S. taxes.

For the entrepreneur, the EB-5 visa program is an amazing opportunity. And Puerto Rico is the ONLY place this tax efficient version can be had.

I hope you’ve found this article. For more on setting up an EB-5 visa business in Puerto Rico, see: Coming to America Tax Free with the EB-5 Visa and Puerto Rico

For assistance with Puerto Rico, you can reach me at info@premieroffshore.com or call us at (619) 550-2743. All consultations are free and confidential.

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