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E-2 Visas: Alternative to EB-5 Visas

E-2 Visas: Alternative to EB-5 Visas

With foreign nationals from China and other countries facing increasing waits and backlogs for their EB-5 Visas, many are now investigating other options that get their foot in America’s door. One of the emerging options that appears to offer either a good first stage, or simply an alternative, to the popular EB-5 Immigrant Investor program is the E-2 visa.

The Business Aspect of E-2 and EB-5 Visas

Both the EB-5 and E-2 Visas are issued to individuals intending to establish a business in America. In each instance, the petitioner must commit substantial funds into the new commercial enterprise they are establishing in the US.

There is a major difference between the amounts invested through the two visa programs: while the EB-5 program states specific minimum investment amounts ($500,000 for a TEA-designated investment or $1,000,000 for all other types), there is no stated amount required for E-2 visas. Most experts advise a minimum of $200,000 when launching a business under the E-2 petition; in any case, there must be enough money to adequately capitalize the new venture.

Another difference between businesses operating under an E-2 visa as compared to running a company under the EB-5 program is the counting of new employment. Whereas EB-5 investments expect to see at least 10 new workers for each $1,000,000 invested, the E-2 program simply requires enough staff to run the business effectively. This freedom from meeting job creation requirements makes the E-2 visa even more attractive for many entrepreneurs.

Advantages and Benefits of E-2 Visas

While the E-2 visa is not a green card, it offers some special features that make it an attractive option for foreign nationals desiring entrance into the United States. Perhaps the greatest benefit of the E-2 visa is that the processing and approval time for this visa is one of the shortest, often taking less than three months from application to issuance. Even better, there is no ceiling on the number of E-2 visas that can be issued, which is a tremendous relief for those immigrants facing the lengthy delays for some countries waiting for approval of their EB-5 petition.

While this visa expires in two years, E-2 visa holders can request two-year extensions without limit. Even though this requires the E-2 visa owner to watch their calendar carefully and stay on top of their renewals, the process is easy and quick to complete every two years.
Immediate family members also benefit from E-2 visas. They are not granted their own E-2 visa, but both the spouse and children under age 21 will be issued derivative E-2 visas which allows them to accompany the petitioner and live in America. Children may attend public schools and even qualify for state tuitions for college admission. The spouse of the E-2 visa holder may seek gainful employment, but children are not allowed to work as dependents of the petitioner.

Another advantage of E-2 visas are that key employees are eligible to apply for the visa. In such instances, those executives and other non-owners qualify for an E-2 managerial visa; as with the standard E-2 visa, spouses and dependent children can have derivative E-2 visas issued to them.

Differences Between E-2 Visas and EB-5 Visas

The main difference between the E-2 and EB-5 Visas is the permanent residency feature that is granted to EB-5 Visa holders. While the E-2 visa does provide the holder with much of the freedoms that permanent residents have, they hold a pure visa with no possibility of gaining US citizenship through it.

Another difference between the two visas has to do with the percentage of business ownership. Due to the size and scope of many EB-5 projects, especially those invested in regional centers, there are usually more than 100 investors in a project; this means that each investor owns a small percentage of the overall investment, sometimes less than 1 percent. Conversely, E-2 visa holders must own 50 percent or more of the business they are operating.

Holders of EB-5 Visas must satisfy residency requirements; this means they must reside for at least half of their time in the States. Failure to adhere to this directive could result in abandonment of their permanent residency status unless a two-year re-entry permit is obtained. Individuals holding an E-2 visa will find much more lenience regarding their physical location during the year. Because the E-2 visa grants entry, but not residency, holders of this visa have no minimum or maximum periods of time to spend in the US.

How visa holders are taxed is another area where differences can be vast. For EB-5 Visa holders, income is declared on their US tax return and appropriate taxes are levied; this includes income earned outside the US. E-2 visa holders face an unusual situation, because they must first run a “substantial presence” test to determine if they are treated as a resident alien and pay taxes just like EB-5 Visa holders or if they qualify for a non-resident alien status.

The substantial presence test uses a formula to determine if the resident alien status is applied. The E-2 visa holder will be deemed a resident alien if that individual physically resided in the US for at least 31 days during the most recent calendar year and if the total number of days lived in the US over the last three years is more than 182 days, adjusted as follows:

1. Count all days lived in the States in the most recent year;
2. Add 1/3 of the days lived in the States for the previous year; and
3. Add 1/6 of the days lived in the States for the year before that.

A simple example illustrates how this is calculated: assume an E-2 visa holder lived in the United States for 120 days for the previous three years (2015-2017) (which is an actual total of 360 days, well over the 183-day threshold). To determine if this person is a resident alien, the total days lived are adjusted for 2015 and 2016 as follows:

• For 2016, 120 is divided by 3 for a total of 40 days, and
• For 2015, 120 is divided by 6 for a total of 20 days.

The adjusted total is 180 days, which classifies the E-2 visa holder as a non-resident alien for 2017. This further means that the E-2 visa holder avoids paying US taxes on worldwide income earned, which can add up to a huge savings.

E-2 Visas for Citizens of Treaty Countries Only

So far, E-2 visas sound like ideal alternatives to an EB-5 visa, or to use while waiting to be approved for an EB-5 petition. The final hurdle for qualification is determining the nationality of the E-2 applicant. The E-2 visa will only be issued to citizens whose nation is considered a Treaty Country; a list of eligible nations can be reviewed here on the US Department of State website.

For those citizens whose country is not listed as a treaty country with an E-2 classification, there are still options. Because the E-2 visa is based upon the country of citizenship of the individual instead of the country of birth, some enterprising immigrants are opting to change their citizenship to a nation classified as E-2 on the Treaty Country list and then submitting their E-2 petition. Advisors point to Grenada as an ideal country to seek citizenship, as it can be issued in four months or less through an investment, and Grenada is classified as an E-2 Treaty Country.

Avoiding USCIS Through E-2 Visa Petitions

The USCIS has a reputation for thorough and rigorous reviews of all working visa petitions, as all EB-5 applicants are aware. It is only after receiving USCIS approval that individuals then file for their visa at a US Consulate. Those considering the E-2 visa route are relieved to learn that this is the only working visa that circumvents the USCIS and allows the applicant to directly submit their petition at a US Consulate. As US Consulates are all over the world, most interested parties contact the consulate located in their country of birth; other options include visiting a consulate at one’s country of citizenship (for Grenada citizens, the US consulate is in Barbados), a consulate in the country of residence, or any other US consulate worldwide willing to process the petition.

For those individuals working outside the USCIS, it is especially important that applicants be fully prepared for the many questions asked and documents required during the interview at the consulate. For this reason, and many more, applicants desirous of fast and successful outcomes wisely choose to work with experienced and knowledgeable experts in the field of E-2 and EB-5 Visas.