The EB5 Program in the US Becomes More Competitive Among Global Golden Visa Options

The EB-5 investor immigration program in the US has been revised with the EB-5 Reform and Integrity Act, and the US Citizenship and Immigration Services (USCIS) is refining new requirements. With these changes, the program is now a more competitive option among other golden visa programs worldwide.

Back to the Fundamentals

For the unanointed, it might be beneficial, to begin with, the fundamentals. A so-called golden visa is a method by which a government entices foreign investors to immigrate by granting them permanent residency or citizenship in exchange for their investment in the country. The investment may be in a government fund to promote public purposes, such as hospital construction, or in real estate or financial offerings. The benefits to the investor may include the ability to live and work in the country, access to tax advantages, using a new passport to travel more freely, visa-free zones such as the Schengen area in Europe, and access to the country's healthcare and education systems. Issuing golden visas stimulates economic growth and prosperity, which is advantageous to the nation.

It All Began in Canada

The Canadian Federal Immigrant Investor Program, established in 1986, was the first modern-day residency-by-investment program. It became one of the most popular immigration programs in the world almost immediately. The program offered Canadian permanent residence in exchange for a $400,000 investment over five years. The federal government shut it down in 2014 after concluding that investors lacked sufficient ties to Canada and paid low taxes. Alongside the federal program, a provincial Quebec investor program was launched in Canada but was subsequently discontinued for renovations. One favorite aspect was that Canadian financial institutions were willing to finance these investments in exchange for a smaller, one-time payment from investors. While there are no immediate plans to reopen the Canadian federal program, the Quebec program is anticipated to reopen in April 2023, primarily for French speakers who wish to live in that province.

Massive Development Followed by Cautiousness

Since 1986, more than one hundred countries have enacted legislation similar to investment migration. Globally, the programs have, for a time at least, been largely successful. Then, a few years ago, the EU initiated discussions regarding limiting golden visas. Reasons included:

1. Corruption and Money Laundering

Golden visa programs allowed foreign investors to launder or legitimately invest in illicit funds. In exchange for granting visas to ineligible applicants, corrupt officials could also exploit the agenda to accept bribes.

2. Insufficient diligence

Some nations did not conduct adequate background checks on applicants, leaving the door open for criminals or extremists to obtain residency or citizenship.

3. National Security Dangers

There were concerns that criminals, terrorists, and other individuals who posed security risks could exploit golden visa programs.

4. Tax Evasion

Some golden visa programs allowed investors to avoid taxes in their home countries or the host country, which could harm the economy and erode public confidence in the government.

5. Real Estate Bubbles

It was believed that some golden visa programs, particularly those requiring investments in real estate, contributed to real estate bubbles and drove up housing prices, making it difficult for locals to afford to house.

6. Criticism Emanating from Within the European Union

According to the EU, these programs threatened the principle of free movement within the EU and could lead to abuses.

7. Public Resistance

Some golden visa programs were criticized for their perceived elitism and preferential treatment of wealthy individuals.

The Pressure to Improve

In general, governments faced increasing pressure to ensure that their golden visa programs were transparent, equitable, and not susceptible to abuse. The result has been that some countries were forced to close their programs altogether. These included the Cypriot, British, Portuguese, and Irish programs, and Spain appears to be close to ending its program. After facing scrutiny from the EU, Malta revamped its program in 2021 to make it more stringent and now markets it as the world's most prestigious citizenship-by-investment program. In this vein, the United States recently introduced legislation restricting citizenship-by-investment investors' ability, such as those with passports from Grenada and Turkey, to obtain E-2 visas to invest in the United States if their country of origin lacks a trade relationship with the United States. Even countries that still offer golden visa programs require applicants to undergo extensive criminal and security background checks, provide evidence of the legal source of their investment funds, demonstrate the flow of funds, and establish a genuine connection to the country of investment.

Some Nations Are Still Operating

Italy, Greece, and Germany are among the few European nations that still offer residency to investors. There is still citizenship by investment programs in the Caribbean, including those in St. Kitts and Nevis, Dominica, Antigua and Barbuda, and others. Notably, closing a golden visa program does not necessarily indicate that the government is no longer interested in attracting foreign investment. To address any concerns and preserve the integrity of their programs, governments may alter the requirements or structures of their programs. It is precisely what the United States did with its EB5 program, which is why it is gaining prominence today.