Differences between the E2 Investor visa and the EB5 visa
Both visas allow you to work in the United States, but getting the E2 visa is much easier and faster
The EB5 has been in existence for several years already. Upon an investment of $1000000 in America, creating at least ten jobs for 10 U.S. citizens for the continuous duration of at least two years, you get the so-called "green card" or permanent work permit for the United States. Please note: with the EB-5 visa, one does not become a U.S. citizen. Having a "green card" is not the same as being a U.S. citizen. If the investment is made in depressed areas of the United States, then the required investment is no longer $1000000 but drops to $500000, still maintaining the constraint of creating ten jobs in America. Depressed areas are designated as such by state and local laws.
In 2020, most EB5 visa applications (about 80%) came from four countries-China, South Korea, Taiwan, and the United Kingdom. Many applicants also came from Vietnam, India, Brazil, Mexico, and Nigeria.
The EB5 visa makes no sense for Italian citizens who can instead opt for the E2 Investor visa.
It is much easier to realize the conditions to apply for and obtain the E2 Investor visa for the United States than to apply for the EB5 visa
There is no limit to the type of investment that can be made, regardless of whether the area is designated as depressed or not: it can range from setting up a foundry in New York State to opening a hotel in Florida to setting up a printing press in New Hampshire... It doesn't matter what the investment is, the important thing is that you create at least 10 jobs in America for at least two years with the minimum prescribed investment which is currently $1 million. The EB-5 visa has had considerable success in China, for example, or in Russia, where there's an abundance of people who can invest the million and want to leave quickly without having to wait for the technical time frame for issuing a business visa for the United States.
The EB-5 visa is not the only visa for America that allows people to reside and work in the United States on an investment basis. The E2 Investor visa, for example, provides that those who open a business in the United States by investing a substantial amount with the type of business to be started can receive a 5-year visa. The E2 visa is renewable upon expiration if the conditions underlying the initial issuance remain and is automatically extendable to a spouse and minor unmarried children. The latter may also reside in the United States for the duration of the E2 visa.
The spouse's E2 visa functions as an actual visa or work permit for the United States, in that the spouse can work for any company in America [and not necessarily only in the company through which the E2 Investor visa could be obtained]. Note that the law does not specify the amount to be invested in the United States to obtain the E2 visa, merely describing its characteristics. It is also important to note that to obtain the E2 visa, there is no requirement to hire a minimum number of employees in America. Finally, the E2 visa does not automatically confer the status of U.S. tax resident as opposed to the so-called green card issued with the EB-5 visa.
The tax consequences associated with obtaining a green card through the EB5 visa
Taxation in the United States and Green Cards: The "Repatriation Tax"
In addition to immediately making you a U.S. Permanent Resident for Immigration status purposes, obtaining a Green Card also directly and automatically makes you a U.S. tax resident. There is nothing wrong with this in itself. Still, before taking such a step, it is highly advisable to do a review of your assets and income situation to understand the consequences of this double change in status in tax and immigration.
In particular, we would imagine that the people who want to obtain the Green Card through the EB5 visa application are people who, due to the nature of the requirements for applying for the visa itself, have a varied wealth situation but still of some substance. They are most likely people with holdings in Italian or European companies [still in foreign companies where, in the new U.S. tax resident status conferred by the Green Card, "foreign" means NOT American].
If this is the case, great care should be taken. The Trump Tax Reform introduced starting in FY 2018 subjects certain income derived from participation in foreign companies to taxation in America. Specifically, Section 965 of the IRC [Internal Revenue Code] provides that U.S. tax residents who own at least 10% of a foreign company must pay the so-called "Repatriation Tax" provided for in the aforementioned legislation. The tax is calculated on undivided profits accumulated since 1986. Taxation on undivided profits earned as cash is 15.5%, while taxation on undivided profits accumulated in the form of "assets" is 8%. The Repatriation Tax is due only in the first year. In subsequent years, a different taxation regime applies.
This is another reason we strongly advise against applying for the EB-5 visa and opting for the E2 investor visa instead. Suppose the goal of applying for the EB5 visa is to obtain a Green Card to move to live in the United States. In that case, we recommend that you do a detailed analysis of your income and asset situation to avoid costly surprises once you become a U.S. tax resident through the combination "EB5 visa + Green Card application".
Beware of the costs for the EB5 visa application process [and also the timeframe for obtaining the visa]
While the E2 investor visa application can be prepared and submitted by anyone, the application for the EB5 visa can only be handled by entities that have been approved by U.S. immigration. As is always the case in non-market situations, the cost goes up quite a bit. The time required to prepare the EB5 visa application and obtain the EB5 visa is much longer than the time needed to obtain the E2 visa.