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When does an EB-5 investor become subject to U.S. taxes and other laws?

At any point a foreign national is visiting the United States, they must abide by all local, state, and federal laws. Generally, when an EB-5 investor’s U.S. tax obligation commences is when the investor is granted conditional permanent resident status and is physically residing in the U.S. Once a green card has been issued, the EB-5 investor is considered a lawful resident of the United States and is therefore subject to taxation on their worldwide income.

U.S. Resident Tax Status

After residence in the U.S. has begun, the foreign national will officially be recognized as a U.S tax resident and will be subject to U.S. tax laws. EB-5 investors should consider two types of taxes, income tax and estate tax, and know that the start date of residence for each is determined differently.

For income tax, an EB-5 investor is considered a U.S. resident for tax purposes if any of the following situations are applicable:

  • The EB-5 investor holds a U.S. green card, in which case the start of residence is the date on which the EB-5 investor becomes a lawful permanent resident and is physically present in the United States.
  • The EB-5 investor passes the substantial presence test. To fulfill this qualification, the EB-5 investor must be present in the United States for a minimum of 31 days of the year, in addition to a minimum of 183 days including (i) the current calendar year, (ii) a third of the preceding calendar year and (iii) a sixth of the second preceding calendar year.
  • The EB-5 investor opts to be considered a U.S. tax resident. This choice is applicable beginning from the date of entry to the U.S. provided the EB-5 investor has been present in the United States for 31 consecutive days during the year of election and for three quarters of the time between the aforementioned period of time and the end of the year of election.

With regards to estate tax, an EB-5 investor is considered a U.S. resident for tax purposes from the date when the investor decides to remain in the United States. This date is ascertained through information provided on the investor’s EB-5 visa application, as well as other variables such as the existence of significant interpersonal ties in the U.S. and how much the EB-5 investor travels.

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