Special Considerations for Indian EB-5 Investors (Remittances, Tax)

The EB-5 Immigrant Investor Program offers a pathway to U.S. Green Cards for foreign investors willing to make a significant capital investment in a U.S. commercial enterprise that creates or preserves at least ten full-time jobs for qualifying U.S. workers. For investors hailing from India, several unique financial, regulatory, and taxation considerations must be navigated alongside the standard EB-5 requirements.

Remittance Regulations and Sourcing Funds

A critical hurdle for Indian EB-5 applicants is demonstrating that the investment capital was legally sourced and properly remitted to the United States, adhering to both Indian and U.S. regulations.

Adherence to Indian Foreign Exchange Management Act (FEMA)

Indian residents must comply strictly with the Foreign Exchange Management Act (FEMA), administered by the Reserve Bank of India (RBI). Funds transferred abroad must generally be sourced from:

• Resident savings or income.
• Inherited wealth remitted from abroad.
• Sale proceeds of assets held overseas (subject to specific holding periods).

It is crucial that the investment capital is documented as having gone through the Liberalized Remittance Scheme (LRS) limits or through appropriate capital account transaction approvals if exceeding LRS thresholds.

Source of Funds Documentation

U.S. Citizenship and Immigration Services (USCIS) requires meticulous documentation proving the lawful origin of the invested funds. For Indian investors, this often involves extensive paperwork:

1. Tax returns filed in India (ITR forms).
2. Bank statements showing the accumulation of the invested amount.
3. Proof of asset sales or business income documentation in India.

Failure to clearly trace the funds from their origin in India to the U.S. investment account is a primary reason for Requests for Evidence (RFEs) or denials in EB-5 petitions.

U.S. Taxation Implications for Indian Investors

Once the investment is made and the investor becomes a U.S. Green Card holder (or resident for tax purposes), they are subject to U.S. taxation on worldwide income. This interaction between Indian and U.S. tax codes requires careful planning.

Taxation of EB-5 Investment Income

The income generated from the EB-5 investment—whether through operational profits or interest/dividends from the New Commercial Enterprise (NCE)—is taxable in the U.S. The specific tax treatment depends on the structure of the NCE (e.g., Limited Partnership vs. LLC).

Key tax considerations include:

• Pass-Through Entities: If the NCE is structured as a partnership, the investor may be taxed on their share of the profits even if those profits are not immediately distributed.
• Tax Treaties: The U.S.-India Double Taxation Avoidance Agreement (DTAA) may mitigate instances of being taxed twice on the same income stream, but specific guidance is needed for EB-5 structures.

Reporting Requirements (FATCA and FBAR)

Indian investors who maintain financial interests or signature authority over foreign financial accounts (including accounts in India) must comply with stringent U.S. reporting requirements:

Foreign Account Tax Compliance Act (FATCA)

This requires reporting specified foreign financial assets if their aggregate value exceeds certain thresholds.

Foreign Bank and Financial Accounts (FBAR)

FinCEN Form 114 must be filed if the aggregate value of all foreign financial accounts exceeds USD $10,000 at any time during the calendar year.

Navigating the Concurrent Green Card Application (I-526E/I-485)

Indian nationals often file their I-526E petition concurrently with Form I-485 (Application to Adjust Status) if they are already legally present in the U.S. (e.g., on an H-1B or L-1 visa). This concurrent filing strategy offers significant advantages:

• Employment Authorization Document (EAD): Allows the applicant and dependents to obtain work authorization based on the pending status.
• Advance Parole (AP): Permits travel outside the U.S. while the I-526E is pending.

However, concurrent filing requires that all documentation, especially proof of lawful entry and maintenance of status, is impeccable.

Conclusion

Successfully navigating the EB-5 process from India requires meticulous planning regarding capital sourcing under FEMA, strict adherence to U.S. source-of-funds tracing, and proactive engagement with U.S. tax specialists familiar with international reporting obligations. Early consultation with immigration and tax professionals experienced in the India-U.S. corridor is essential to ensure compliance and maximize the chances of a successful outcome.