How Investments are Impacted
First and foremost, you do not pay taxes assessed on your investment.
EB-5 investors are generally subject to withholding tax until they become a conditional permanent resident in the United States either through consular processing of their immigrant visa abroad or through adjustment of status to a conditional permanent resident.
Finances & Permanent Residency
Once EB-5 investors become a conditional permanent resident in the United States, they are subject to federal income tax on their worldwide income. This includes sources of income in the United States and sources of income outside the United States.
However, foreign tax credit may be available on income that is taxed outside the United States if the US has an income tax treaty with an investor”s home country. EB-5 investors are also subject to other types of taxes, such as: estate, gift, capital gains, property (if applicable), and generation-skipping transfer taxes. State taxes may also apply.
A U.S. permanent resident must comply with the same reporting and disclosure obligations as U.S. citizens. These obligations include fulfilling Bank Secrecy Act compliance requirements such as filing Reports of Foreign Financial and Bank Accounts (FBAR’s) under the Bank Secrecy Act and income tax returns with schedules including Form 8938, Statement of Specified Foreign Financial Assets, Form 3520, Report of Foreign Gift, Bequest or Inheritance, Form 5471, Controlled Foreign Corporation Return and potentially others.
The non-willful failure to file these returns and reports carry significant civil penalties ranging from $10,000 per account per year for FBAR violations to 25%-35% of inheritance or gift values in the case of Form 3520. Willful failures to file can result in civil penalties of 50% or $100,000, which is greater, in the case of FBAR violations and potentially criminal prosecution. Tax evasion and willful failure to file FBAR’s are crimes which the Supreme Court has determined to be a serious felony which means conviction carries with it potential deportation.
Consult a tax attorney and a licensed CPA before applying to be an EB-5 investor.