In November 2019, the EB-5 investor visa underwent important changes. USCIS passed the new EB-5 Immigrant Investor Program Modernization Regulations. There were various EB 5 visa changes contained in the new regulation, there are two important changes that will impact the investors.
- Increase in the EB 5 investment amount
- New Targeted Employment Area (TEA) definition
Increase in the EB 5 Investment Amount
USCIS in the new regulation has increased, the EB-5 investment amounts from $500,000 to $900,000 if the project is situated in a TEA, and the investment amount has increased from $1 million to 1.8 million for the projects not located under TEA. Considering that the investment figures have not changed since the program’s inception, an inflation analysis was conducted by the Department of Homeland Security (DHS) consulting with the Departments of State and Labor under the guidance of USCIS. The federal agencies decided that the increase will reflect the present-day dollar worth of the original investment level set in 1990 by the US Congress. They have, in addition, added that each year there might be an inflation correction to the investment amount based on inflation.
New Target Employment Areas
Another noteworthy change that has been implemented was with the Target Employment Areas. The new regulations outline what is required to qualify the project as a TEA and also emphasizes on the fact that USCIS will make the decision on an area to be called TEA, not the individual states. Prior to the new regulations, the regional center could, without any difficulty, ask a TEA letter from the state, county, or town government in which the project was located (depending on the state). This will not be the process anymore since the USCIS will adjudicate all TEA requests. This will boost the integrity within the EB-5 program because the regional center operators will not be able to gerrymander their projects into qualifying into a TEA when they do not.
We have talked about the changes in the EB 5 Investor visa in details on our previous blogs. Now, we would like to address the elephant in the room “5% TCS on foreign remittance.”
If the increase in the EB 5 investment amount was not a bigger problem for Indian Investor to add to it Union Finance Minister on February 15, 2020, proposed to levy 5% TCS (tax collected at source) on foreign remittance under the amendment of Sec 206C.
In a statement, the Ministry of Finance said, “The government imposed a 5% tax collection at source (TCS), akin to TDS on remittances. This was done after an internal survey done by the income tax department. IT found that the foreign remittances are on year on year high while the filing of IT returns on the foreign remittance funds are going down. They took into account a sample of 5,026 cases of foreign remittance, and they found that 1,807 cases haven’t filed their income tax returns. In the FY 2018-19, $14 billion were sent out using the liberalized remittance scheme. However, in 2009- 2010, the LRS remittances were less than USD 1 billion. Also, as per the findings of the sample survey, no returns were filed for around 24 percent of the amount sent by these 5026 remitters.”
This will impact all the foreign investment including EB 5 Investor Visa which has already seen a significant jump in the investment amount.
What does this mean for the EB 5 Investment?
Beginning April 1, 2020, Indians wishing to immigrate to America will now have to pay an additional $45,000 for the EB-5 investor visa. Although this additional tax would impact all visa categories, it will predominantly create a barrier for people investing in the EB-5 visa program. With the recent increase in the EB 5 investment amount to $900,000, an additional $45,000 will need to be paid to get the funds remitted from India. The investment amount will hurt Indian investors more if the project is located in Non TEA which will increase the investment amount to $1.89 million, almost an increase of $100,000.
To add to it there is also a 3% – 4% charges by the banks as a nominal transaction fee and currency conversion charges. By considering the revised investment amount by USCIS and new taxation policies along with the bank charges, an investor will pay anywhere between $73000 to $ $154,000 more along with their investment amount based on a project located in a TEA or non TEA.
Impact on Indians
With the increase in the Investment amount and changes in the taxation policies, it is estimated that around 60% of the Indians living in India will opt out of the EB 5 program in the short run. However, as per the prediction done by various EB 5 advisory firms, they believe that with the recent changes in the H1B visas and the long waiting periods for green cards in EB-1 to EB-3 category, has made it challenging to secure Green Card through these routes. The EB-5 visa, despite the various changes, remains the most stable and most transparent route to the US green card.
Moreover, the demand for EB 5 investor visas from Indians mostly comes from the individuals who are residing in the United States on a work visa or are waiting to receive their Green Card. For them, the benefit of the US Green Card outweighs the cost of the EB 5 Investor visa. Most of the Indians living in the USA are also exempted from the 5% tax increment on foreign remittance based on the condition that they make their funding in EB 5 investor visa directly from the USA
With the increase in the EB 5 application from 50 in 2015 to 800 in the year 2019, EB 5 Investor Visa has seen tremendous upward growth from Indians. The increase in the investment amount along with the introduction of TCS by the Indian Government will act as a speed breaker in the growth of the EB 5 investor visa in the short run for India. However, with the changes and uncertainty in the various immigration visas, the popularity of EB 5 visa is expected to grow in the coming years.
Other Immigration Option for the US Residency
With the increase in the Eb 5 Investment amount, people are looking into different routes for US immigration. One of the most popular among them is the E2 visa. The E2 is a nonimmigrant visa which enables investors from treaty nations to operate in the USA through their investment at a US business. The business needs to be bona fide, and the investment has to be substantial, which means that the enterprise has to have the ability to support you and your household in the next five years, and your investment has to be a significant proportion of the worth of the venture. Additionally, you ought to be entering the US together with the only goal of creating the enterprise, which means that your E-2 visa investment should not be thought of as a side project.
There are over 60 countries which have an E2 visa treaty with the USA. However, the popular investment route among Indians is mainly confined to Grenada and Turkey. Under the Grenada citizenship by Investment program, the applicant has to make a $220,000 investment in a government-approved real estate project. What makes the country a lovely destination is their E2 visa treaty with the US, wherein a Grenadian can apply for US residency and usually gets it approved within three months. A US E-2 visa enables an investor and his family to live as well as do business in the US for a minimum investment of $150,000. The investment should be within a venture that the investor is ready to “develop as well as direct,” and he needs to own at least 50% of the business. In 2018, the US processed about 40,000 E2 visas overall. However, the country break up is not provided by USCIS.
With the various changes around EB 5 Investor Visa and tax implication imposed by the Indian government the demand of EB 5 Investor Visa is predicted to slum in the short run. Investors will also move their focus to other immigration routes such as E1 and E2 visas for fulfilling their American Dream. In the long run EB 5 visa will again catch the attention of Indians irrespective of the investment amount as it will still remain the easiest and the surest route to US permanent residency.
This eBook covers:
- Popular Immigration Programs
- Investment amounts
- Duration to get your permanent residency
