Foreign Investors

Visa Programs and

Tax considerations

There are several types of visa programs that allow foreign investors to come to the US and qualify for a green card or permanent residence card. Additional information regarding FIRPTA which applies to Real Estate transactions.

FIRPTA (Foreign Investment in Real Property Tax Act)

What is FIRPTA?

Congress enacted the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) to impose a tax on foreign persons when they sold a U.S. real property interest. A foreign person includes a nonresident alien or foreign partnership, trust, estate or corporation that has not elected to be treated as a domestic corporation under IRC §897(i). For U.S. property dispositions subject to FIRPTA, the transferee (purchaser) is required to withhold and remit to the IRS 10% of the gross sales price to ensure that any taxable gain realized by the seller is actually paid. The withholding rate is computed differently for other foreign entities, such as foreign corporations and trusts, which are required to withhold 35% of the capital gain realized on the sale. For more information on FIRPTA, visit: www.irs.gov and download Publication 515: Withholding of Tax on Nonresident Aliens and Foreign Entities.

Common Forms Needed

W-7 (application for IRS Individual Taxpayer Identification Number) 8288-B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests)

3 Exceptions to FIRPTA

1. Property to become buyer's personal residence. Section 1445 (b)(5) provides an exemption for property acquired by a transferee that will be used as the transferee’s personal residence. To qualify for the exemption, a closer will generally require the transferee to sign an affidavit stating that the amount realized (generally sales price) is not more than $300,000, and that transferee or a member of their family intend to use the property as a personal residence for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer.

2. Seller declaration of non-recognition of gain or loss. The second exception to the FIRPTA withholding requirements is in the case of a simultaneous 1031 exchange. This is a less common exception and is not discussed in detail here. For more information on this exemption please consult with a CPA, tax attorney or the IRS.

3. The third exception is for transactions in which the IRS has issued a withholding certificate (“Withholding Certificate”) to the foreign seller. The amount that must be withheld by a buyer can be reduced or eliminated pursuant to the Withholding Certificate. The transferee, the transferee’s agent or the transferor may request a Withholding Certificate. The IRS will generally grant or deny an application for a Withholding Certificate within 90 days after its receipt of a completed Form 8288-B application.

Disclaimer

The information contained in the following is intended to be reviewed by all interested parties and it should not be transmitted, copied, or relied upon as complete when it comes to FIRPTA. It is an illustration with brief details about FIRPTA. This presentation has been prepared to provide summary, unverified information in regards to FIRPTA. The information contained herein is not a substitute for a thorough due diligence investigation. We have not made any investigation and makes no warranty or representation. The information contained in this presentation has been obtained from sources we believe to be reliable; however, we have not verified, and will not verify, any of the information contained herein, nor have we conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All parties viewing this must take appropriate measures to verify all of the information set forth herein and bears all risk for any inaccuracies. We highly recommend you speak with a CPA, Attorney, or other qualified person to discuss your option with regards to FIRPTA. Be aware that it is the responsibility of the buyer to collect from the seller with regards to FIRPTA. While we use reasonable efforts to include accurate and up-to-date information, we make no warranties or representations as to its accuracy. We assume no liability or responsibility for any errors or omissions in the content of this page or website.

We highly recommend you seek the advice of an immigration attorney and/or an accountant familiar with FIRPTA.

Visa Programs

EB-5

USCIS administers the Immigrant Investor Program, also known as “EB-5,” created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a pilot immigration program first enacted in 1992 and regularly reauthorized since, certain EB-5 visas also are set aside for investors in Regional Centers designated by USCIS based on proposals for promoting economic growth. All EB-5 investors must invest in a new commercial enterprise, which is a commercial enterprise:

  • Established after Nov. 29, 1990, or

  • Established on or before Nov. 29, 1990, that is: 1. Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results, or 2. Expanded through the investment so that a 40-percent increase in the net worth or number of employees occurs

Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business including, but not limited to:

  • A sole proprietorship

  • Partnership (whether limited or general)

  • Holding company

  • Joint venture

  • Corporation

  • Business trust or other entity, which may be publicly or privately owned

This definition includes a commercial enterprise consisting of a holding company and its wholly owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. Note: This definition does not include noncommercial activity such as owning and operating a personal residence.Job Creation Requirements

  • Create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years (or under certain circumstances, within a reasonable time after the two-year period) of the immigrant investor’s admission to the United States as a Conditional Permanent Resident.

  • Create or preserve either direct or indirect jobs:

    • Direct jobs are actual identifiable jobs for qualified employees located within the commercial enterprise into which the EB-5 investor has directly invested his or her capital.

    • Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor. A foreign investor may only use the indirect job calculation if affiliated with a regional center.

Note: Investors may only be credited with preserving jobs in a troubled business. A troubled business is an enterprise that has been in existence for at least two years and has incurred a net loss during the 12- or 24-month period prior to the priority date on the immigrant investor’s Form I-526. The loss for this period must be at least 20 percent of the troubled business’ net worth prior to the loss. For purposes of determining whether the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded. A qualified employee is a U.S. citizen, permanent resident or other immigrant authorized to work in the United States. The individual may be a conditional resident, an asylee, a refugee, or a person residing in the United States under suspension of deportation. This definition does not include the immigrant investor; his or her spouse, sons, or daughters; or any foreign national in any nonimmigrant status (such as an H-1B visa holder) or who is not authorized to work in the United States. Full-time employment means employment of a qualifying employee by the new commercial enterprise in a position that requires a minimum of 35 working hours per week. In the case of the Immigrant Investor Pilot Program, "full-time employment" also means employment of a qualifying employee in a position that has been created indirectly from investments associated with the Pilot Program. A job-sharing arrangement whereby two or more qualifying employees share a full-time position will count as full-time employment provided the hourly requirement per week is met. This definition does not include combinations of part-time positions or full-time equivalents even if, when combined, the positions meet the hourly requirement per week. The position must be permanent, full-time, and constant. The two qualified employees sharing the job must be permanent and share the associated benefits normally related to any permanent, full-time position, including payment of both workman’s compensation and unemployment premiums for the position by the employer. Capital Investment Requirements: Capital means cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital shall be valued at fair-market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act. Note: Investment capital cannot be borrowed. Required minimum investments are:

  • General. The minimum qualifying investment in the United States is $1 million.

  • Targeted Employment Area (High Unemployment or Rural Area). The minimum qualifying investment either within a high-unemployment area or rural area in the United States is $500,000.

A targeted employment area is an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate. A rural area is any area outside a metropolitan statistical area (as designated by the Office of Management and Budget) or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census.

EB-1: Multinational Managers and Executives

Managers or executives who play an important or critical role in an international business may obtain EB-1(3) green cards on the basis of their executive or managerial duties for the company. Companies, not individuals, file EB-1(3) petitions, and they must petition the government for each green card needed. Qualifying for a multinational manager or executive green cardA foreigner may be eligible for an EB-1(3) green card if all four of the following conditions are met:

  • The individual must be a manager or executive.

  • The individual must have been employed by the foreign company as a manager or executive for at least one year of the three prior to transferring to the U.S.

  • The foreign company and the U.S. company must be affiliated in some way, either as a parent, subsidiary, affiliate, or branch.

  • The U.S. company the individual intends to be employed by must have been an active operating business for at least one year.

Foreign Investment Real Property Tax Act (FIRPTA) Withholding of Tax on Dispositions of United States Real Property Interests. To view the official Internal Revenue Service website for information, Click Here. Form W-7: Application for Individual Taxpayer Identification Number (ITIN). Who needs an ITIN? The IRS issues ITIN's to foreign persons and others who have federal tax reporting or filing requirements and do not qualify for SSN's. If you do not have an SSN and are not eligible to obtain an SSN, but you have a requirement to furnish a federal tax identification number or to file a federal income tax return, you must apply for an ITIN.

Additional information can be found on the United States Citizenship and Immigration Services (USCIS) website by clicking here.

We highly recommend you seek the advice of an immigration attorney