A report published by Forbes – a leading global media company – states that Chinese investors are turning to the US L1 visa to extend their stay in America. The report comes amid increasing uncertainty over the future of the EB5 green card program.
According to Forbes, the controversial EB5 immigrant investor scheme is ‘losing its appeal’ among Chinese investors. This has been attributed to a waiting list that spans several years, the possibility of the minimum investment threshold being increased, and the growing concerns about the program – including a rise in the number of fraud cases.
The family of Jared Kushner the son-in-law of Donald Trump and a top adviser to Trump has come under fire for trying to use their connections to the White House to promote the EB5 green card scheme in China. This has added to the controversy over the EB5 immigrant investor scheme. More recently the Kushner family has said that they will be taking less of a role in promoting the EB5 immigrant investor scheme in China.
As a result, wealthy Chinese investors are opting for the L1A visa for managers and executives for entry to the US. The L1A non-immigrant US visa enables companies to transfer key personnel or company founders to oversee business operations, for up to seven years. Chinese nationals are unable to come under the E2 Visa or E1 Visa which otherwise might also be considered instead as a US visa route.
The largest international real estate portal in China, Juwai.com, is understood to host three to four visa-related events every month, according to the Forbes report. The portal’s CEO, Charles Pittar, revealed that when the US L1 visa is explained to Chinese investors almost one-third of EB5 applicants then decide to apply for it instead. There are also other much cheaper green card visa routes such as the EB1C for international managers and executives.
Pittar said: “What Chinese investors want is the path with least resistance - meaning minimal uncertainty, the shortest timeframe and the lowest cost possible.”
EB5 Immigrant Investor Green Card program may become less popular
Introduced in 1990, the EB5 program, which essentially enables wealthy foreign entrepreneurs to pay for a US green card, has generated billions of dollars in investment. According to the USCIS, since 2012, the program has generated $8.7 billion dollars’ worth of investment, and created 35,150 jobs.
Real estate developers consider the program to be an ‘easy source of funding’, but the scheme’s popularity has led to an increasing number of problems, most notably, an extensive waiting list. 10,000 US greens cards are issued every year via the EB5 program, which is subject to quotas by country. However, because of the way the quota system operates in reality most of the EB5 visas go to Chinese nationals.
With 90% of EB5 applications arriving from China, there’s now an eight year waiting list for Chinese nationals hoping to secure an EB5 visa. Regulatory uncertainty has shrouded the program in recent weeks. Over the past two years, lawmakers have kept the EB5 scheme running via temporary extensions amid talks to increase the minimum investment amount.
In January, the US Department of Homeland Security put forward proposals with a view to increasing the minimum investment amount to $1.3 million for areas in the US with high unemployment rates (up from the current investment of $500,000). Meanwhile, for all other areas, investors would have to part with $1.8 million, up from $1 million.
It’s not clear if the minimum investment thresholds will come into force, with Congress currently caught up in other issues, the EB5 program does not top their priority list. However, the increasing uncertainty has made the scheme far less appealing for potential Chinese investors. Congress it has to be said has had difficulty agreeing on significant changes to US visa law.
Add to all this, a requirement for investors to provide proof of funds, wealthy Chinese entrepreneurs are further deterred from using the program. The Forbes report says that investors are turning to other US visas because the paperwork is ‘less strict than that of the EB-5, while decisions on visas are much quicker and far easier to predict.’
Other immigrant and non-immigrant US Visa options for the rich
With the future of the EB-5 program under scrutiny, there’s a negative feeling around it in China. One commentator said: “It’s partly because of the uncertainty of what will happen to the program. There’s no real certainty or security and some projects have failed. Some have been outright fraud.”
Meanwhile, the Forbes report suggests that the L1 visa is a much more attractive proposition for Chinese investors. With no language or education requirement and no quota to contend with, an L1 visa can be acquired within one or two months in many cases.
The L1 visa restricts an investor’s stay in the US to seven years. The good news is that many foreign entrepreneurs can make an application for another US visa, such as the EB1C green card visa for multinational managers and executives within two years of entry to the US.
Meanwhile, US green cards among wealthy Chinese investors are decreasing in popularity. Reaz Jafri, partner at Withers, a wealth management firm told Forbes: “Green cards are expensive and most billionaires don’t want to expose themselves to estate taxes and worldwide income.”
It’s widely known that the US is one of only a handful of countries to tax its citizens on worldwide income. US Green Card holders are treated in a similar way to US citizens for tax purposes. A recent list compiled by Nomad Capitalist and published by Bloomberg, ranked 199 nations based on their ‘value of citizenship’.
The chart took into consideration, factors such as visa-free travel options, taxes levied on citizens living overseas, the flexibility to hold multiple passports and various other criteria. The US tied with Slovenia in the rankings - in 35th place - mainly due to its worldwide taxation system.
Aside from the L1 visa, rich foreign investors turn to another sub-category of the EB1 visa, which is issued to overseas nationals with ‘extraordinary ability.’ According to Jafri, a ‘millionaire or billionaire who has successfully started a company in the US and made it public, becomes eligible for such a visa because of their business accomplishments.’ You can also be eligible for this visa right away based on your accomplishments outside the US.
Despite the declining popularity of the EB5 program, the US remains an attractive investment opportunity for foreign entrepreneurs. Jafri said: “For certain types of people, the US is still seen as a bargain, a place where you can acquire hard assets and make investments with no risk of appropriation by the government. They’re pretty comfortable bringing money over.”
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