from BORDERS: Thoughts of a Cross-Border Advisor (25 Feb 2013) -- "An Alternative Cross-Border Planning Solution: The US "E" Visa"

By John Flecke, JD, CFP® posted 06-19-2013 09:39


Check out a recent and well written blog post by immigration attorney, John Ainsworth: "U.S. Investment Visas - E1 and E2 (Treaty Trader and Investor)". John provides a good overview of the "E" visa options. However, I look at the "E" from a different vantage point: as a cross-border financial planner. The cross-border planner integrates a broad range of relocation and cross-border lifestyle issues including income tax, estate planning, risk management, retirement, investment planning, as well as immigration planning and other areas of interest to the client.

From a cross-border planner's perspective, the "E" visa may be a better immigration option than the green card, depending on one's resources, financial goals, tax planning, career and retirement plans. 

Who should consider an "E" visa?

  • An individual who cannot (or should not) place at risk $500,000 or $1 million as required for an Immigrant Investor (EB-5) green card. To qualify as an EB-5 investment, investor capital must be "placed at risk". For financial planning purposes, assume the investment is lost. An individual with a retirement nest egg of only $2 million (or even $3-$4 million, depending on other factors) should consider an E-1 or E-2 instead.
  • A high income individual who plans to retire outside the US in the years ahead and has no wish to become a dual citizen as a (the?) way of avoiding US expatriation tax (discussed below). 
  • An individual who wishes to come and go as she pleases from the US without the obligation to spend half of her time in the US as a green card holder. Downside: if she is spending substantially less than half of each year in the US, she may not qualify for US tax resident status. But then again she may not want US tax resident status. 
  • An individual who needs a waiver of inadmissibility to enter the United States but cannot qualify for an immigrant waiver of inadmissibility to live in the US as a green card holder. An individual granted a nonimmigrant waiver can live in the US year round for decades with a "E" visa.
  • An individual who wants the flexibility to be a US tax resident or nonresident in any given year, typically for tax and investment planning reasons (Warning: Use this flexibility sparingly and only with professional guidance!).

The US Tax Haven and the "E" Visa 

Keep in mind that the United States is a tax haven for people from many countries, including Canada. Read +Take Your Money and Drive (A Canadian's Best Tax Haven: the US), the 2012 guide by +KeatsConnelly President +Robert Keats.

One of the very few disadvantages of the US tax haven is the burdensome (some might say punitive) US expatriation tax regime imposed on individuals who make it big in the US and then decide to return to their home countries or take up residency in other countries. [Note: see my recent post US Expatriation Tax Is NOT Just an Exit Tax: Consider the Next Generation]  However, only long term green card holders and US citizens who give up their status are subject to this tax regime. "E" visa holders do not fall within the subject class. They can live in the US as tax residents for decades--and then "take their money and run." 

Of course, no solution is perfect. A Canadian can maintain "E" status as long as there is an E-1 import/export business to manage or an E-2 investment to direct--and the visa holder is physically and mentally capable of managing that business or directing that investment. At some point late in life, a youthful CBP officer at a port-of-entry may decide that an "E" visa holder is no longer capable of managing a business or an investment. What does the "E" visa holder do then? 'Not a rhetorical question.

My own view is that pursuing dual Canadian-US citizenship usually offers a better long term immigration planning solution, for many reasons. For financially successful individuals who have been green card holders for years, acquiring dual citizenship is the way of escaping the subject class and avoiding expatriation tax. However, dual citizenship certainly is not for everyone. The "E" can be a great option for some clients, with proper cross-border financial planning.