Helping Latin American Investors Understand the Financial Choices that Come with EB-5 Investment
Foreign nationals from LATAM countries can benefit from EB-5 as a smart financial move, not just an immigration choice, so long as they plan properly.
The decision to seek permanent residency in the U.S. through the EB-5 Immigrant Investor Program is a personal one, and each investor has different motivations. The primary reason for pursuing EB-5 is a green card, but the choice of EB-5 over another method can come down to finances, country of origin, current immigration status (such as H-1B or F-1), or family and business needs.
Since the passage of the EB-5 Reform and Integrity Act of 2022 (RIA), the general profile of an EB-5 investor has changed. Minimum investment amounts are now $800,000 in a Targeted Employment Area and $1,050,000 for non-TEA EB-5 investment. These high minimums mean the new EB-5 investor is likely a High Net-Worth Individual (HNWI), and these types of investors have different concerns from other immigrant groups.
At a recent webinar, experts from JTC participated in a discussion on HNWI investors from Latin and South America, how EB-5 can provide them with benefits beyond a green card, and the types of planning they need to do while building an immigration plan.
Why people choose EB-5
The webinar, “EB-5 and Latin America: Why Now is the Time to Invest in the U.S.,” was co-hosted by JTC and CanAm Enterprises on June 12th, 2024. Moderator Mila De Olano – VP LATAM, CanAm Enterprises – walked through some of the benefits of EB-5 for foreign investors. These include the freedom to live and work anywhere in the U.S., a path to citizenship, lower-cost in-state tuition at public universities, the ability to sponsor immediate family members for a green card, and the ability to freely travel to and from the U.S. thanks to concurrent filing of Adjustment of Status.
Of course, the biggest reason to pursue EB-5 is to receive permanent residency. As we’ve discussed in previous posts, most EB-5 investors are less concerned with returns and more concerned with getting their green cards. That’s why JTC helps Regional Centers show investors they’ve found a safe project with full transparency, so they can feel confident they’ve invested with the right people. Mismanagement of investor funds can lead to petition denials, so thorough due diligence is crucial.
“You want to make sure that whoever is approaching you with an EB-5 project has already done EB-5, has a track record of developing projects, but more importantly has that track record with the job creation,” said Jose Rincon, VP Business Development at JTC.
“All these things are really important for an investor to conduct their due diligence on projects to make sure that they’re putting themselves and their families in the best opportunity to get their capital returned and to get the ultimate goal of achieving their green card for them and their families,” he added.
If an investor’s number-one goal is a green card, they should focus on finding an experienced Regional Center that has helped others find success in EB-5, which is why CanAm proudly communicates its 100% I-526 and I-829 approval rate. While investors can aim for returns, the returns from a safe EB-5 project likely won’t match what could be achieved with other types of investments.
Why LATAM investors should look to EB-5 now
The webinar panelists discussed many reasons HNWI from Latin and South America choose to hold assets abroad, even before they make the decision to relocate to another country. One simple reason is diversification: by holding assets in other parts of the world, investors can hedge against risk.
De Olano mentioned the “dollarization” of assets – by holding capital or assets in the United States, they are valued in dollars, taking advantage of the currency’s strength at a time of inflationary pressures elsewhere.
“Our environment today is really the strongest investment market, the most stable one,” she said. EB-5 can be a way to achieve this through an investment in the U.S. that will remain invested for a significant period of time. In addition, while under conditional residency, EB-5 investors can pursue other opportunities in the country.
“If you’re a sophisticated investor and you want to diversify, I think EB-5 is a good route to take,” said Rincon.
This gateway to U.S. markets is another major advantage of EB-5, and a natural extension of a relationship to America that many LATAM HNWI already have.
“Culturally, the U.S. and Latin American countries are aligned,” said Emilio Miguel, Regional Head of Americas at JTC. Many wealthy LATAM families have been to the U.S., are familiar with the culture, and may already have investments or second homes here.
The biggest reason for moving capital to the U.S., said Miguel, is the political, social, and economic risks at home and the desire to hedge against potential turmoil. “The US is the top destination for when Latin American families want to hedge their homeland risks,” he said. “If you want to hedge from risk in your home country, you go to a safer place.”
In fact, according to Miguel, that’s exactly what’s happening with investors from Brazil. “The majority of the investment coming from Brazil into the US is not to get residency; it’s just to shift and to hedge from local risk.”
And while EB-5 is not seen as the most profitable investment one can make, that matters less for those who are simply looking to preserve wealth by putting it in a safer environment. “There’s been some conservative movement from growth to preservation” in the past few years, said Miguel.
HNWI looking to move assets to the U.S. and take advantage of opportunities would be wise to look at EB-5, as it offers the previously-mentioned advantages like in-state tuition, green cards for immediate family members through a single investment, and the ability to pursue other business ventures.
“The green card is a way to be able to do business, stay, work, leave, and send kids to school in the U.S.,” said Miguel.
As for why now, De Olano pointed to the availability of visas in reserved categories such as those for rural investments, which have the advantage of priority processing. “It’s beautiful to see that it’s actually working,” she said. If investors want to take advantage of these available visas, the faster they act, the better.
But HNWI have a lot more to consider when it comes to immigration. They may have businesses in their home countries that cannot be easily left, along with homes, offshore holdings, commodities, investments, and other assets, and moving it all to the U.S. is not simple. That’s why an EB-5 decision can’t be taken lightly, and why expert planning is necessary.
Additional financial concerns when considering an EB-5 investment
The panelists agreed that for HNWI, pre-immigration planning should start long before any potential move, and the main focus of that planning should be the different tax laws that will apply to their assets and investments and how taxation will change with their immigration status.
“When a family is moving to the U.S. or an investor is investing in the U.S., tax is one of the first things they have to bear in mind,” said Miguel.
“We always have to talk about tax planning,” agreed De Olano, who said “knowing the tax laws of your own country and what impact is it going to have on you when you move to the United States” should be a part of any EB-5 discussion.
JTC’s Private Client Services division works with HNWI from all over the world and deals in fund structures in a variety of global jurisdictions. The company’s fundraising for PE and VC funds also makes it familiar with the taxation concerns and corporate structures that can help investors preserve as much of their wealth as possible.
“All these basic structures, we see on a daily basis for Latin American families and individuals trying to bring wealth to the U.S. in different ways,” said Miguel.
Whether utilizing personal holding companies in jurisdictions like the Cayman Islands, LLCs and corporate structures, or other methods, JTC’s PCS team has experience in helping LATAM investors protect their interests as they acquire property in America.
“There are ways to mitigate taxes,” said Miguel, adding that when it comes to buying a home, “if you’re doing it as an investment and you’re planning on selling it at a profit, make sure that you structure it accordingly.”
Miguel explained that the importance of succession planning is why JTC’s PCS team helps set up trusts for investment types such as equities and bonds, bank deposits, or art and collectibles. Understanding the laws surrounding estate taxes can potentially save millions.
“When a foreigner owns property in the U.S. and dies, estate tax kicks in, and it’s a very strong kick,” said Miguel. For U.S. citizens and foreign nationals domiciled in the U.S., the estate tax (which can be up to 40%) does not kick in below $12,920,000. But for foreign nationals not domiciled in the U.S., the threshold is just $60,000. That’s a big difference, and a reason why getting the right tax advice is essential.
Another reason foreign investors look to EB-5 is the ability to send their kids to school in the U.S. As De Olano pointed out, “we have to remember that one investment is for the entire family.” That means the children of petitioners can move to the U.S. and go to school here, even taking advantage of in-state tuition and admissions rules. And when they graduate, they can pursue business opportunities without being limited by a student visa.
“EB-5 can be, really, the answer for those that see the United States in the future for them, for their families, and for their business,” said De Olano.
Some foreign nationals want their children to have the advantages of a U.S. education and the opportunities that come after it, but don’t want to relocate themselves. To achieve this, they may choose to give their child the capital to make an EB-5 investment. But what happens when you give your child a large sum of money like that?
“In some countries, that donation is taxed,” said Miguel. “In some, it’s not.”
“That’s a strategy that has to be built,” said De Olano. “That’s the moment that you also sit with your wealth manager or your banker or your attorney to see what is the clearest, fastest, easiest way to make that money travel, because that’s part of the source of funds.”
This situation is rare, as Rincon pointed out. “90% of the time, these investors are applying into the EB-5 program to be able to bring their whole family.” But the issue then becomes: when should you move? What if opportunities are available for your family and children now, but you still have business interests abroad?
Del Olano described a common situation where the primary earner stays in their home country during the EB-5 process while the rest of the family immigrates to the U.S., with the plan being that the primary earner will come later. It can be done, she said, but “you have to be really smart with the taxation.”
“When you are applying for a green card and you will be a green card holder, you will be a permanent resident, and you will need to pay taxes in the US to keep that permanent residency,” said Miguel.
How JTC helps high net-worth individuals preserve wealth when relocating
A recurring theme of the webinar was that even if LATAM HNWIs don’t feel ready to move their entire families to the U.S. this instant, it’s not a bad idea to start planning early. As the EB-5 investor profile becomes increasingly geared toward HNWIs, Regional Centers will need to do more to help investors deal with their complex financial situations and the variety of concerns they have when moving to the U.S.
That’s why JTC, in addition to our EB-5 Administration Services, also has a Private Client Services division to offer trust services, foreign domiciliation expertise, and other capabilities to help investors with their moves to America, something no other EB-5 fund administrator can offer. By pairing JTC’s PCS team with our EB-5 team, we offer something truly unique in the EB-5 space that sets our clients’ offerings apart.
The webinar included much more discussion of the concerns of LATAM investors today and what they need to know about EB-5. Watch the webinar recording to get more great info from the experts at JTC and CanAm.
To watch the full webinar online, click here.
