US EB-5 Visa Investment: Indians cautiously consider new tax rules effective next month

As program participants are required by the USCIS to remit EB-5 investment funds up front, the Indian tax increase on money transfers to the U.S. invariably comes up in EB-5 consultations CanAm is having now with Indian investors.

More immigrants from India participate in the EB-5 program than most other countries, with the number of visas issued in FY2023 second only to China. The reasons are simple. Unlike other visas, such as H-1B, the EB-5 visa does not require an offer of employment or family sponsorship.

There’s also no lottery, nor the employment uncertainty that is all too common with H-1B visas at this time, especially for those workers in the Tech field. There’s no English language requirement, no business background requirement and green card holders have the flexibility to travel outside the United States.

The EB-5 visa allows you the opportunity to invest capital that builds a future for yourself and your family. As an investor, you can bring your spouse and children under 21 years old to the United States. There are even admission advantages and reduced tuition costs available for you and your family at universities. And unlike other student visas that can place restrictions on work study programs, the EB-5 visa gives qualified children the freedom to study and work wherever – and whenever — they want in the U.S.

EB-5 – What You Need to Know

Under the EB-5 Immigrant Investor Program his program, investors (and their spouses and unmarried children under 21) can apply for direct, lawful permanent residence (become a Green Card holder) in the U.S. by investing $800,000 in businesses located in Targeted Employment Areas that create at least ten full-time jobs for U.S. workers.

There are two fundamental goals of the EB-5 program 1) Ensure that green cards are issued that enable investors and family members to achieve their immigration objectives; and 2) Return an investor’s investment (repayments are typically within a 5–7-year period).

The EB-5 program was first introduced in 1990 as an economic stimulus to grow U.S. employment and attract foreign capital. Since its inception, foreign investors in the EB-5 program have made more than $50 billion of capital investment in the U.S. economy and created more than 1.35 million jobs.

Over the last 35 years, CanAm’s EB-5 projects have repaid more than $2.24 billion in capital, benefiting more than 4,500 investor families. CanAm has also assisted EB-5 clients with securing more than 8,100 permanent green cards so that they and their families could pursue and live the American Dream.

The India Outbound Money Transfer Tax Increase

The central government’s policy would increase the Tax Collected at Source (TCS), from 5% to 20%. The increase, scheduled to take effect October 1, 2023, would add significant upfront costs on outbound cash wire transfers. For example, the tax on a $800,000 wire transfer would rise by $120,000 – from $40,000 to $160,000 – under the higher tax rate.

This increase potentially impacts anyone living in India seeking to come to the U.S. on an EB-5 visa, and those already in the U.S. on another visa who may be eligible to concurrently file to adjust their status while lawfully living in America.

More on the Tax Increase

To be clear, the tax once paid on outbound money transfer tax may be eligible to be reclaimed by Indians on their annual tax returns. With that said, any EB-5 investor should consult with an experienced financial or tax advisor to understand all angles and impacts of the TCS payment and reclaim process.

In the weeks leading up to October 1, 2023, we recognize that the TCS increase on overseas remittances may enhance demand for foreign investment choices like EB-5. Equally, if not more important, is understanding that if the government is moving in the direction of making international transfers more costly for Indian investors now, this may not be the last of the increases India taxpayers see in the TCS rates.

The U.S. economy is as strong as it is thanks to Indian immigrants. According to U.S. Census Bureau data, nine percent of doctors in the U.S. are of Indian descent. One in every ten tech workers in Silicon Valley is of Indian origin and one in every three start-ups has an Indian co-founder. A strong EB-5 program is key to building on Indians’ success stories in America and we’re determined to work with clients to overcome any obstacles they may encounter in their immigration journey.