eb-5 visa Archives - Premier Offshore Company Services

This article is about where to start an EB-5 business. Where to set up an EB-5 visa company with 10 employees, get your US green card and passport, and pay near zero in US taxes. If you’re considering where to open an EB-5 visa business, I bet you’ve never considered this tax trick.

First, a bit on the EB-5 investors visa. With the EB-5 program, you can invest $500,000 in an approved project or start your own business and invest $1 million. That business must employ at least 10 people and operate until you get your US passport. This article is focused on entrepreneurs who wish to start their own business to immigrate to the United States.

After you setup a business, it takes about a year for your US green card to be issued (for your EB-5 application to be approved). Then you wait 5 years to gain citizenship. Once you have your US passport, you have all the rights of a natural born American… your citizenship can’t be taken away for any reason.

That is to say, you must keep your business going, and 10 employees working, for those 6 years (or a bit more). If you can do that with an investment of $1 million, great. If not, you’ll need to put in more. If you make a profit, you can take it out as a distribution… just keep the business going at all costs.

The EB-5 program has been growing quickly. Back in 2009, investments totaled $300 million. It’s increased by about 30% per year, and brought in finds of around $7 billion in 2015. Experts expect it to grow by 30% to 50% in 2017.

The largest number of investments have come from China. 8,156 visas were issued to Chinese nationals in 2015 compared to 111 visas to persons from India (the second largest group).

One reason 2017 is expected to be a record year is that the United States Citizenship and Immigration Services has proposed significant changes to the EB-5 investor visa program. They’re looking to increase the minimum from $500,000 to $1.35 million and the stand alone business amount from $1 million to $2 million. Those who file before the increase will be allowed to proceed under the lower amount.

Now on to the focus of this article, where to start an EB-5 business.

The best place to start an EB-5 visa is San Juan, Puerto Rico. Period, end of discussion. No area or city in the United States can compete with Puerto Rico when it comes to starting an EB-5 business.

The reason to set up your EB-5 business ub Puerto Rico is simple and can be stated in one word: TAXES.

Once you have your green card, and eventually your passport, you’ll be taxed on your worldwide income. That includes income earned in your home country and money made in the United States. The US IRS wants a cut of every dollar you make!

That includes capital gains and passive income. When you sell real estate, stocks, or any other capital asset, you must pay US capital gains tax on the sale. Capital gains are currently taxed 23.8% and this is expected to go down to 20% once Obamacare is eliminated.

The same goes for income from your EB-5 business. You’ll pay Federal income tax on your profits at about 35% and another 10% to your state (if you’re in New York or California). You must pay your taxes, and keep your business going for at least 6 years, to receive your passport.

The only EB-5 region of the United States that won’t tax your business income and capital gains is the territory of Puerto Rico. If structured properly, you’ll pay only 4% in corporate tax on your EB-5 profits and zero in capital gains and dividends from foreign corporations (such as those in your home country).

This is to say, an EB-5 business set up in Puerto Rico will pay 4% in corporate tax and you’ll pay zero on your foreign sourced income (profits earned outside of Puerto Rico). You can cut your US tax from 40% to 4% by setting up your EB-5 business in Puerto Rico.

In order to combine the US EB-5 investors visa with the tax benefits of Puerto Rico, we follow these steps:

Form and license an Act 20 business in Puerto Rico with a minimum of 5 employees.
Apply for the EB-5 visa.
Once the EB-5 is granted, hire an additional 5 employees to reach the required number of 10. Act 20 required 5 employees while the EB-5 requires 10.
You immigrate to the United States using your green card.
Apply for the Act 22 personal tax holiday in Puerto Rico.

Once all of these steps are complete, you’ll have an Act 20 business taxed at 4% and zero tax on your worldwide income through Act 22. You’ll also have a green card and, if you keep the business going and in compliance, a passport after 5 years.

In order to qualify for Act 22 (step 5), you must be living in Puerto Rico. Specifically, you must buy a home on the island and spend at least 183 days a year there. You can spend the rest of your days abroad or in any part of the United States.

For example, we have clients that spend 100 days a year in New York, 183 days in Puerto Rico, and the remainder (80 days) traveling.

If you travel extensively, you must be sure to spend more time in Puerto Rico than you do in the United States. For example, 160 days in Puerto Rico, 40 days in the United States, and the rest traveling abroad.

I hope you’ve found this article on where to start an EB-5 business to be helpful. Please contact me at info@premieroffshore.com or call us at (619) 483-1708 with any questions. We’ll be happy to assist you through all stages of this process.

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) 483-1708.

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