Immigration Insider

The Rise of the Brazillionaire

After over two decades of representing hundreds of Brazilians investment-based  and professional immigrants in the United States, I finally made it to Brazil. My hasty January visit -- more than anything a glimpse into the still-Napoleonic tendencies demonstrated by the occasional US visa officer -- left me with a clear impression of Sao Paolo: a thriving metropolis as dynamic as its population.

Today's Wall Street Journal (page A10) discusses how Brazil's rapid economic recovery is starting to create concerns similar to those the US has had with China: the overheating of what has turned into a colossal industrial machine. The Journal predicts that Brazil's central bank "is likely to start a series of interest rate increases" to cool things down. Today I want to briefly discuss what this all means to wealthy Brazilians "on the fence" about US immigration intentions.

It is no secret the South Florida's Brazilian ex-pat population has thrived in our local economy; it is also not a secret that many Brazilian professionals who entered the US in H1B and L1 visas have overstayed for a variety of reasons. Some of them have started thriving businesses after losing their H1B sponsorship; still others have wound down the Brazilian home company... while still possessing apparently valid L1 visas in their passports, they are acutely aware of the reality that the closure of the foreign company renders their current US immigration status nothing more than an artifice easily discoverable by the US consul or airport DHS officer.

Brazil's economy is expected to expand some 5.5% this year, but some economists are warning of the 7% rate of growth. Like Indiana and China, this type of growth -- particularly in such a squiggly global economy -- means that Brazil will more than likely begin to tighten its money supply in order to avoid the inevitable inflation which have long leg economies like Brazil's. (The Journal reminds us that as recently as the early 90s, inflation was in the four-digit range in Brazil.)

In a powerful, diversified, and commodities-driven economy such as Brazil's, all of this growth means one thing: an increasing number of affluent Brazilians trying to reconcile their country's economic boom with the historical lessons taught by the instability of Latin American politics. For many -- both those remaining in Brazil and those already semi-transplanted into the United States -- this combination of elements opens up the possibility of international relocation... usually to the US.

The main issue, at least as far as the uber-wealthy, is the worldwide tax liability which comes with permanent residency in the United States.  Yesterday, Melissa and I had a dynamic meeting with Steven Cantor and his team.  Steve, whose practice focuses on foreign investors “transplanting” to the U.S., is a distinguished tax attorney with whom we collaborate on a regular basis.  Besides being just plain outstanding in his area of expertise, Steve is the only tax guy I've met who approaches problems creatively, a bona fide "outside the box" thinker in a profession known more for counting beans than seasoning them.  I asked a lot of questions about pre-immigration tax planning and the like, and, as usual, Steve had the answers we needed...and those answers open many doors for our Brazilian clients with one foot in America and one eye on the tax implications of what that second foot will mean.

As we prepare for next series of EB5 investment seminars for Latin America, the white-hot economy of Brazil is squarely within our sights. Like so many others on this planet, many Brazilians with whom we speak simply like the idea of U.S. residency as a Plan B, “just in case”, given the quality of their current lives in Brazil.

There are legal ways to both immigrate to the U.S. AND to minimize tax implications through intelligent pre-immigration compliance structured by the right folks.  Email if you have more questions and we'll get them answered!

Taxation Without Representation

I've been representing foreign investors in the U.S. for 18 years.  So have many of my colleagues.  So why is it that the notion of "tax planning" is such a conundrum for most immigration attorneys?  The truth is that we, as immigration counsel, are "programmed" to steer most folks to legal permanent residency.  There are valid reasons, the primary one being that the majority of clients seek such status.  But a significant (and growing) number of foreign investors in the U.S. wish to preserve their foreign residence as primary...and have no desire on becoming subject to taxation in a country in which they do not intend to live permanently!

It seems like on an almost-daily basis I'm approached by a client with substantial offshore assets who is neither interested in U.S. permanent residency nor in abandoning his home country...but is being advised by immigration counsel that getting a green card is their sole option...not so!

I am hardly an expert on international taxation but I know the basics:

• whether you like it or not, the U.S. taxes worldwide income on anyone who is a "tax resident" within the meaning of the Internal Revenue Code
• tax residency is automatic for persons who get permanent residency
• tax residency is triggered by so-called "physical presence" tests which determine tax status based upon the amount of time a foreign national has been physically present in the U.S.
• In addition to worldwide taxation of all income anywhere, U.S. tax residency means estate taxes apply for assets worldwide (unless legal protective mechanisms, such as trust structures, have been established.)

All this adds up to one thing: for high-net-worth foreign nationals, a complete understanding of the income and estate tax implications is essential BEFORE they get their green card...or before they establish tax residency via physical presence.

What are the implications of this for immigration counsel?  Several important considerations:

1. It is critical to insure that the client receives competent tax counsel both in his/her home country AND in the U.S....before U.S. tax residency is manifested and the individual is subject to U.S. tax laws.
2. On many occasions, it is necessary to defer the U.S. permanent residency -- even prolongued presence in the U.S. -- until all of these issues are resolved under a tax planning arrangement most prudent for that individual client.

It's a shame to see the colossal financial damage which can occur to clients who have been given limited options by immigration counsel.  Once you are a U.S.tax resident like the rest of us, you have to cough it up, and that's what the law requires.  Before you are U.S. tax resident, however, you have a number of legal tools and options with which to minimize the financial impact of coming to the U.S.

Perhaps as immigration counsel we should step back and look beyond the next immigration step to consider the client's big picture.