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By Joseph Barnett
With the South African economy entering its first recession since 2009 and the value of the Rand falling 20% in 2018, more and more South Africans are seeking alternate permanent residency in foreign countries. Industry data reveals that demand for a US Green Card through an EB-5 investment of $500,000 is the highest it has ever been, with a 486% increase in the number of EB-5 petitions filed by South Africans over the past three years. This huge growth in demand is the highest among European, Middle East, and African countries.
The EB-5 visa provides an opportunity to live and reside in America permanently and to become a US citizen after 5 years. The Green Card through investment must create jobs for US workers. The EB-5 visa provides investors (and their spouses and unmarried children under the age of 21) greater flexibility to live, work, or study in the US than most other US visa options. As a job creation program with an immigration benefit, the EB-5 Program has brought in billions of FDI over the past decade and has helped created tens of thousands of jobs for US workers. In return, investors and their families receive the benefit of permanent residency in the US, including the option to sponsor other family members for permanent residency or become a US citizen, if desired.
Although Britain and Australia have traditionally been key destinations for immigration, and while many South Africans may be seeking second passports to Malta and Cyprus, “most are seeking opportunities for their families and children in the US that offer excellent education, career, and quality of life options,” said Bernard Wolfsdorf, former President of the American Immigration Lawyers Association who grew up in Durban and immigrated 40 years ago.
However, time may be running out for South Africans to take advantage of the EB-5 visa program at the current investment levels, as proposals to increase the minimum investment amount from $500,000 to $1,350,000 have been pending since January 2017, waiting for final implementation. Many feel the changes will occur by December 7, 2018, the date that the budget for the US federal government was extended to last week by President Trump.
Attorney Joseph Barnett, a Partner at the California-based US immigration law firm Wolfsdorf Rosenthal LLP, states, “We have generally seen a surge of EB-5 petition filings in the past when big changes to the EB-5 Program were expected, and there’s little doubt it will happen again before December 2018. Who wants to invest more than double the amount for the same immigration benefit?”
The EB-5 Program requires an “at risk” investment of lawfully obtained capital into a US company that is affiliated with or sponsored by a “Regional Centre”. A “Regional Centre” is not a physical building or place to meet; rather, it’s a private entity designated by the US government to connect immigrant investors with US companies seeking EB-5 capital to create jobs. As of September 2018, there are over 880 entities designated as a “Regional Centre” under the EB-5 Program, but each differs in experience, competency, and ability to structure EB-5 projects to return capital to investors. Designation is granted after submission of an application showing how investment in a specific geographic area will create jobs for US workers.
However, just because an entity has been designated as a “Regional Centre” does not guarantee that EB-5 project will create sufficient jobs for full permanent resident status. Attorney Barnett warns, “Performing due diligence on EB-5 project options is the first and most critical aspect of a successful EB-5 case. Investors must feel confident that the US company will be able to execute its business plan and create the jobs needed to support EB-5 petitions. Additionally, the U.S. company should have a clear exit strategy in place to ensure that EB-5 investors are repaid their capital investment at the appropriate time. It is also highly advisable to speak with an experienced international tax advisor to discuss how U.S. green card status can affect tax liability, and how to properly plan to minimise the amount of tax.”
As South Africa has become a reasonably-sized market for EB-5 investment, more “Regional Centres” will be marketing their EB-5 investment projects in the coming year, further increasing the number of immigrant investors from South Africa.
Attorney Barnett will be in South Africa from October 1-10. If you would like to schedule a no-cost consultation to discuss the EB-5 visa option, please contact him at [email protected].