EB-5 Investor Immigration and Tax Planning 2
Key words: EB-5 Investor Immigration; Financial Planning; how to avoid double taxation in US and China; Green Card
Making a decision to immigrate to the U.S. is a major life event for everyone. However, failure to do a thoroughly planning, especially financial and tax planning, would have significant impact for the next few years or even for a life time. As a result of the U.S. global income taxation provision, most of the entrepreneurs have to declare their business income not only in their home country, but to the U.S. government as well in order to maintain the hard-won green card.
I believe that advance estate planning before immigration would greatly reduce the cost of maintaining the green card and keep “green card maintenance fee” at minimum. Let’s take investment immigration as an example. As soon as the moment you have the immigration motivation, you should start arranging the property under your name, consult with a professional financial advisor or certified public accountant to prepare a time table of your personal property plan. Follow the time table in accordance with the step-by-step immigration process so that the taxable property under your name could be as little as possible within the scope of U.S. tax laws.
First of all, you should try to avoid becoming a U.S. tax resident before immigration to the United States. U.S. tax laws are different from immigration laws on defining resident. The determining factor is whether the number of days on which the person was present in the United States exceeds 183 days. A person who stayed in the U.S for over 183 days in the last calendar year or in the last three annual weighted average years is recognized as a U.S. tax resident and has to declare income tax to IRS. Once determined to be a tax resident, the range of tax planning becomes very narrow. To sum up, you should avoid becoming a United States indentified taxpayer before obtaining the green card.
Second, you should dispose the property under your name separately before immigration. On one hand, property with appreciation potential in the foreseeable period of time can be arranged under spouse’s, children’s and other trusted person’s names. On the other hand, disposal of depreciated property can be delayed and to be disposed after immigration in order to recognize capital loss so that it can either offset capital gains for the current year or be carried over to offset any future capital gains. In addition, if you have any unrealized gain for your investment in security market, you can consider realizing your gain by selling your securities or fund before immigration to the U.S. and quickly repurchase right after immigration in order to elevate the book value of your securities, which would significantly reduce the capital gains tax.
Third, you should consider the purpose of immigration. If the purpose is to have your spouse benefit from high quality of life or have your children take advantage of the high-quality education system, you can consider applying for investment immigration under their names by transferring minimum required assets to them. Moreover, property under spouse and children’s name has to be well planned as well. Try to avoid arranging non-U.S. assets under their name or making them majority shareholder of your non-U.S. company to eliminate future tax costs.
Fourth, if the purpose of immigration is to live in comfort in your old age, you could consider withdrawing your pension fund as lump sum at one time instead of annuity in order to make the whole amount non-taxable. Otherwise, each time you receive a pension fund from your home country, you have to declare income tax to IRS in accordance with the provision of “global taxation”.
In summary, in the meanwhile of applying to immigrate to the U.S., make sure to consult with professional tax lawyers and professional Certified Public Accountants as to how to arrange the property under your name and how to clear all the obstacles in the process of immigration in order to reduce the cost of a “green card maintenance fee”.
In the following article, we will continue to explore the specific tax issues before and after the investment immigration process. Thank you for your attention.
By Joe Zhenhong Zhou, Caine Yu, CPA and Stanley Liang, CPA