EB-5 Investment - China Suspension: An Unnecessary Fear

The EB5 Market was inundated with unnecessary fear that the United States State Department was shutting down EB-5 Visas for Chinese Investors when it announced on Saturday, August 23, 2014, the unavailability of EB-5 Visas for Chinese Nationals for the remainder of the fiscal year.   While the announcement at first glance appears to be extremely dramatic and with dire consequences, in reality it has little, if any, impact at all for the immediate future.  First and foremost, investors must understand that  this announcement does not affect any I-526 or I-829  processing, nor does it delay immigrant processing for those investors not born on mainland China, and it only delays the processing for those born on mainland China by one month, as normal processing will resume on October 1st, 2014.  The announcement reflects that for the first time ever, the full annual allotment of 10,000 EB5 Visas will have been exhausted by the end of the fiscal year.

However, it must be noted that the U.S. Citizenship & Immigration Services (USCIS) will continue to accept EB5 Petitions submitted by Chinese born investors, however, instead of being acted upon immediately, those cases will be held in the Visa Office’s “Pending Demand” file until October 1, 2014.  At that time, all eligible cases will be automatically authorized from the “Pending Demand” file under the FY 2015 annual numerical limitations.

As such, Chinese born investors looking to utilize the EB5 program should continue to timely file their Petitions to ensure that their petitions are timely adjudicated under FY 2015 quota.

Shahzad Qadri
Partner

Wong Fleming | Washington 

Canada's Termination of Investment Based Immigration Program to Result in Opportunity for EB-5 Investment Program in the U.S.

Canada recently terminated its’ decades-old investor program that had allowed scores of wealthy Chinese to immigrate over the years. The program allowed rich foreign investors to apply for permanent residency in Canada if they had a minimum net worth of 1.6 million Canadian dollars ($1.5 million) and invested 800,000 Canadian dollars in the form of a multi-year, interest-free loan to the government. Approximately 65,000 pending applications -- which the Canadian government estimated would have taken six years to process -- will be returned and paid fees refunded. About 70% of the backlog came from Chinese applicants.

The termination of the Canadian program has left wealthy individuals from China and other countries scrambling for investment based immigration opportunities. This has opened the doors to tremendous opportunities for the EB-5 Investment Program in the United States. The EB-5 Investment Program requires a minimum of $500,000 investment in exchange for permanent residency. With no limitations as to industry or type of project that can utilize the program, EB-5 Investment Program provides a source of “cheap” capital for entrepreneurs.

Traditionally, the EB-5 Investment Program has been utilized by the real estate developers. However, the flexibility and scope of the program makes the program an invaluable source of capital for all industries from biotech, green energy to education. Furthermore, recent changes to the program has made the EB-5 Investment Program far more attractive and easier to utilize. With traditional capital markets still at a premium, foreign investment is an attractive option for all entrepreneurs.

Shahzad Qadri
Partner
Wong Fleming | Washington 

Doing Business in the Middle East – Free Trade Zones

The Middle East, specifically the United Arab Emirates (UAE) continues to attract U.S. companies. In an effort to attract foreign, the U.A.E has established 21 Free Trade Zones (FTZ’s). These 21 Free Trade Zones house approximately 20,000 companies. Establishing a business entity in one of the numerous UAE Free Trade Zones  can be an attractive option for foreign investors and businesses as it moves away from the traditional requirement of mandating that all foreign companies have a local sponsor that is the majority shareholder of the company. All seven Emirates already have, established such economic zones.

The key benefits of establishing and operating in a free trade zone are:    

• 100 per cent foreign ownership of the enterprise
• 100 per cent import and export tax exemptions
• 100 per cent repatriation of capital and profits
• No corporate taxes for 15 years, renewable for an additional 15 years
• No personal income taxes
• Less documentation, mostly in English
• Assistance with labor recruitment, and additional support services such as sponsorship and housing

Shahzad Qadri
Partner
Wong Fleming | Washington 

Setting Up Business in the U.A.E. Free Trade Zone

The EB-5 Market was inundated with unnecessary fear that the United States State Department was shutting down EB-5 Visas for Chinese Investors when it announced on Saturday, August 23, 2014, the unavailability of EB-5 Visas for Chinese Nationals for the remainder of the fiscal year.   While the announcement at first glance appears to be extremely dramatic and with dire consequences, in reality it has little, if any, impact at all for the immediate future.  First and foremost, investors must understand that  this announcement does not affect any I-526 or I-829  processing, nor does it delay immigrant processing for those investors not born on mainland China, and it only delays the processing for those born on mainland China by one month, as normal processing will resume on October 1st, 2014.  The announcement reflects that for the first time ever, the full annual allotment of 10,000 EB-5 Visas will have been exhausted by the end of the fiscal year.

However, it must be noted that the U.S. Citizenship & Immigration Services (USCIS) will continue to accept EB-5 Petitions submitted by Chinese born investors, however, instead of being acted upon immediately, those cases will be held in the Visa Office’s “Pending Demand” file until October 1, 2014.  At that time, all eligible cases will be automatically authorized from the “Pending Demand” file under the FY 2015 annual numerical limitations.

As such, Chinese born investors looking to utilize the EB-5 program should continue to timely file their Petitions to ensure that their petitions are timely adjudicated under FY 2015 quota.

Shahzad Qadri
Partner
Wong Fleming | Washington 

Got Independent Contractors? The IRS Wants to Audit You

The IRS has warned business owners who are using independent contractors as labor or service providers of the potential for a tax evasion audit. Employers have long held the incentive to classify their employees as self-employed independent contractors because they avoid paying employer FICA, federal and state unemployment, worker compensation, medical insurance, holiday pay, and other fringe benefits. However, any sort of misclassification can lead to serious consequences under the law.

Here’s what you need to know if you are or are considering hiring independent contractors for your business:

Reporting Of Expenditures 

You must report all expenditures to independent contractors that exceed over $600 in a calendar year on a 1099 form. This is not limited to corporations, which is a popular misconception.

Misclassification Risks 

While it is often difficult to identify who is an independent contractor versus who is an employee, the IRS believes that misclassification of employees as contractors should be prosecuted aggressively. The Department of Labor, the IRS and its cohorts state that even businesses who have a good faith belief that they are lawfully conducting their business still run the risk of audit due to widespread abuse of tax evasion attempts. Each state as well as the IRS has guidelines and tools that can help employers in classifying their employees.

You Are A Target 

All taxing authorities, including the IRS, the State and the Department of Labor are targeting all businesses with independent contractors. The reason for this scrutiny is that these authorities have determined that many businesses who use independent contractors also attempt to avoid paying taxes on such persons. Should you be caught, the government will asses heavy penalties. Economic loss arguments are not a defense against prosecution.

Assess Risks 

The financial burden that inevitably follows improper classification far exceeds the benefits gained short term. Thus prior to implementing any independent contractors in your business, you should conduct a thorough analysis with your legal and financial counselors to assess whether you are putting your business at risk or not.

Ramina Dekhoda-Steele
Partner In-Charge
Wong Fleming | Washington