China Specific Investment Based Immigration EB-5 Issues: Taxes, Currency Restrictions, and Affiliation

This article discusses some potential issues relating to the EB-5 investment based green card specific to China.
By: Nicklaus Misiti
 
Jan. 18, 2012 - PRLog -- The People’s Republic of China (“PRC”) is far and away the leader in terms of applications and approvals for EB-5 Investment Based Green Cards to the US.  Despite this there are differences in culture and law between China and the US which can create specific concerns for entrepreneurs from PRC.  Three of these concerns are tax issues, currency restrictions, and current of former membership in the Communist Party.

Brief Overview of Tax Issues for PRC National EB-5 Applications

One requirement for prospective EB-5 applicants is the requirement they show their funds were obtained from a lawful source.  One key piece of evidence in showing this is the entrepreneurs personal and business tax records.  Generally, the US government requires tax documents from the past 5 years.  As with many countries PRC has several layers of taxations systems and we discuss the two most common below.

Individual Income Tax

Pre 2006- Before 2006 there was no requirement to file individual income tax returns in China.  Rather the employer or employing business entity took care of this on a monthly basis.  Copies of the monthly tax reports filed by the employer are typically available and should be obtained for anyone applying for EB-5 based green cards

Post 2006- The Chinese tax system now requires the self reporting of income by individuals earning over RMB 120,000 (~$17,500 USD).  The Chinese law requires any taxpayer with annual income above this amount to declare it within 3 months after the end of the tax year.  These tax filings are also relevant for EB-5 applications and should be provided to the immigration attorney handling the case.

Underreporting of tax income can be an issue.  It is important to openly discuss this with your immigration attorney, so they can determine other ways to show the necessary funds were lawfully obtained.

Corporate Tax

To establish the lawful source of invested capital and corporate profits tax filing of the business entity owned in whole or in part by the applicant should be provided to the attorney. The most common types of entities for EB-5 purposes are the Limited Liability Company (youxian zeren gongsi) and “company limited by shares” (gufen youxian zeren gongsi).  Both of these companies are required to at year end file a financial statement that should include a balance sheet, profit and loss statement, statement of financial changes, explanation of financial condition, and profit distribution statement.  These documents should be provided to your immigration attorney to use in your EB-5 application.  

Other documents which can be relevant are quarterly financial reports bearing the seal of the local tax agency confirming approval, evidence of Value Added Tax (VAT), business tax and/or consumption tax.

Currency Restrictions

China  limits the remittance of foreign currency to $50,000 USD per year per individual.  This poses a problem because the minimum investment required to qualify for the EB-5 program is $500,000 USD.  Thus, an EB-5 applicant from PRC may need to recruit family, friends and acquaintances to serve as “accommodation remitters.”  Various informal private currency exchange and/or remittance arrangements involving friends or business associates outside of China may also be acceptable.  US government adjudicators, generally do not impose strict requirements to show the lawfulness or remittances under PRC law.  

Past or Current Membership in the Communist Party

The US government has strict regulations pertaining to the admission of current or former communist party members.  If you have not been a member of the communist party within the past 5 years you should be deemed admissible.  If you have been a member there are various exceptions which may be applicable.  This issue should be thoroughly discussed with an immigration attorney before filing the application.

For More Information

The EB-5 application is a complicated process and should not be attempted without the guidance of a US based immigration attorney.  For more information contact Misiti Global, PLLC at 212 537 4407.  Misiti Global is a full service immigration firm with a specific practice area designated to EB-5 investment based green cards.

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Misiti Global is a full service immigration law firm. We have clients throughout the country and world. Contact us to set up a free case evaluation
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Source:Nicklaus Misiti
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Tags:China, Eb-5, Eb5, Investment Based Immigration, Misiti Global, Nicklaus Misiti, Green Card
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