Your Investment in the US Can Translate into a Visa that Can Be Renewed Indefinitely
By: Olga Quinones, LL.M. Martensen Wright PC, and Anne Grethe Martensen, MBA, HA (Jur.) Martensen Wright Advokatfirma
With ever tightening requirements for Intra company visas such as the L-1 visa, and quickly exhausted quotas for H-1B visas, foreign companies are looking for alternative ways to facilitate the transfer of essential personnel to their enterprises in the US. E visas frequently offer the best option.
E visas allow foreign companies and entrepreneurs to come to the US to establish and develop their business and to bring their key employees to the US.
There are two types of E visas: The E-1 Treaty Trader Visa and E-2 Treaty Investor Visa. Both types of E visas are based on treaties of commerce and navigation between the US and foreign countries. Denmark, Norway and Sweden maintain the above treaties with the US, which allows citizens from these countries to apply for E-1 and E-2 visas.
Benefits of E visas:
- E visas allow individuals to come to the US to start a business;
- There is no time limit on the total duration of E visas. As long as all the requirements are satisfied, E visas can be extended indefinitely. However, it is important to note that the E visa itself does not lead to permanent resident status (a green card), irrespective of how long the person has lived and worked in the US;
- E visas allow for the transfer of essential employees to the US, including employees who have been employed with a foreign parent company for a short period of time (less than a year) or have not been employed with the foreign parent company at all prior to the transfer;
- It is possible for the spouse of the E visa employee to obtain authorization to work in the US.E visas are typically granted initially for 2 to 5 years (the length of time depends on each individual case). The basic requirements for both E visa types are the following: 1) The US Company (the Petitioner) must ultimately be at least 50% owned by the citizens of the same country as the visa applicant’s country of citizenship. It is important to note that ownership is traced to the ultimate individual owners of the business. Foreign citizens who are permanent residents of the US (green card holders) are not considered as qualifying owners for the purposes of E visa applications; 2) The person applying for an E visa (the Beneficiary) must be a citizen of the same country as the individuals who ultimately own at least 50% of the US Company; 3) The visa applicant must demonstrate an intent to leave the US after the termination of his or her E visa status. The last requirement applies at the time when the person is applying for a visa at the US Embassy. Note: this does not preclude an applicant from ultimately applying for permanent residency (green card) in the US if a separate basis for the green card application exists.
E-1 Treaty Trader Visa
The specific requirement for an E-1 (Treaty Trader) visa is that the petitioning company must demonstrate that it has established a “substantial trade” in goods or services between the country of the applicant’s nationality and the US. To be considered substantial, this trade must constitute at least 50% of the company’s total international trade. The trade requirement just mentioned may be fulfilled either by the foreign company or by the US subsidiary that is to hire the Beneficiary.
Notes regarding Qualifying Trade:
- Trade between the foreign country and the US must be in existence before the visa application can be submitted for processing. Trade is defined as the company’s international trade, including both the export and import of goods and/or services.
- If the company is trading goods, it is important to note that the goods must be manufactured in the applicant’s country of nationality (trade country), shipped to the US from the trade country and invoiced in the trade country to count as trade for E-1 visa purposes. Alternatively, the goods can be manufactured in the US, shipped from the US to the trade country and invoiced in the US.
- Substantial trade is determined by the number of the transactions over time, not only by the dollar amounts. For example, one transaction will not qualify as substantial trade, even if it is involves a large amount of money.
It is the authors’ experience that the Embassy requires substantial and detailed documentation in regards to the company’s international trade to satisfy the E-1 visa requirements. Such documents include, but are not limited to, bills of lading, invoices, bank account statements and other documentation showing transactions between the two countries.
E-2 Treaty Investor Visa
As the name suggests, an E-2 visa is based on investment. This type of visa requires a substantial investment to be made in the US Company by a foreign individual (often, but not always, the visa applicant) or a foreign company that has the same nationality as the visa applicant.
Notes regarding qualifying investment:
- The investment must be “substantial” and the funds have to be irrevocably committed. “Substantial” is not defined in the visa regulations. Typically, if the US Company is new, we see success with an initial investment of $80,000 – $100,000. The investment must be sufficient to ensure the successful operation of the US enterprise.
- The investment must be made into qualifying categories of expenses related to the US Company. Uncommitted funds in a bank account or mere ownership of undeveloped land are not considered an investment. Examples of expenses for E-2 visa purposes include US office infrastructure, inventory on hand, equipment, company cars, marketing expenses, recruiting expenses, and one-month’s office rent. Specific types of qualifying expenses often depend on the type of the business.
- The investment may not be marginal. The US business must demonstrate a realistic need and plan to hire US employees and a realistic potential for a financial return that significantly exceeds what is necessary to support a living for the visa applicant and his/her family.
- The investment must be at risk in a commercial sense. If the investment funds are not subject to partial or total loss if business fortunes reverse, then the investment does not qualify to support an E-2 visa application. Loans secured with the assets of the US enterprise do not qualify for an E-2 visa purposes.
Note regarding the visa applicant:
The investor must be coming to the US to develop and direct the US enterprise. If the applicant is not the principal investor, he or she must be employed in a supervisory, executive, or highly specialized skill capacity. Ordinary skilled or unskilled workers do not qualify for E-2 visas.
If you have questions or would like further information on E visas, please feel free to contact Martensen Wright PC at firstname.lastname@example.org. Our phone number is (916) 448 9088. You can also visit our website: www.martensenwright.com
Frequent travelers to the United States should be very familiar with the U.S. Customs and Border Protection’s I-94 website. Martensen Wright has just learned that the site has been updated with a feature allowing certain travelers on visa waivers to check the status of their stay in the US. Staying past one’s “admitted until date” can have serious consequences for future visa applications, so this new feature will surely come in handy for many travelers.
Future updates to the I-94 website will incorporate additional non-immigrant travelers and will allow travelers to check how much longer they may remain in the United States. In addition, CBP is working towards emailing travelers 10 days before their expected departure date to remind travelers how much longer they can remain in the United States without overstaying the terms of their admission.
Read more about the changes to the I-94 website here.
The Internal Revenue Service (IRS) has announced that U.S. distribution subsidiaries of foreign multinationals, including Danish companies, can expect special transfer pricing scrutiny during IRS audits. The IRS is concerned that foreign-owned companies are not paying their “fair share” of income tax when a parent company charges excessively high prices on goods, services and royalties. Incorrect cross-border prices can lead to artificially low corporate income tax payments.
Recently, we have seen the IRS become more aggressive in employing this audit strategy, and challenging transfer prices has become a lucrative way to raise tax revenue. During audits, the IRS will request information on the company’s business operations and justification of the cross-border prices charged between companies – commonly known as a transfer pricing documentation report.
In discussions with tax agents, IRS Auditors regularly review earnings before interest and tax (EBIT) as a percentage of net sales when selecting targets. U.S. subsidiaries incurring losses face the highest risk of scrutiny, and many middle-market companies are being audited for the first time.
New Transfer Pricing Standards in DK Raise the Bar and Widen the Net – Starting at $20 Million in Group Revenue!
The IRS is not the only tax authority concerned about transfer pricing. The Danish tax authority, SKAT, has also become more aggressive in auditing transfer pricing practices for Danish companies.
Transfer pricing has long been a tax concern for the largest multinationals and news articles on Apple, Starbucks, Google and others have raised the profile of this contentious tax issue. Danish transfer pricing documentation rules were updated in 2016 to follow the OECD’s recommendations for combating large-scale tax avoidance by multinational companies. Consequently, fines now apply for documentation breaches. SKAT, for the first time in March 2017 published details of a court case in which a fine for failure to comply with transfer pricing documentation rules was upheld.
For the largest companies, new international transfer pricing documentation standards require companies to provide information on both global business operations (a “Master File”) available to all tax authorities and a transfer pricing analysis (a “Local File”) for tax authorities in all countries where a multinational operates. However, many middle market companies will also be subject to these higher documentation standards in Denmark. Most notably, Danish regulations now require companies with global revenues of DKK 125 million (~ $20 million) and more than 250 employees to be subject to the same higher transfer pricing documentation standards as large multinationals.
In our experience, these new requirements are more prescriptive both in terms of the volume of information required and the details that must be included in a report. For instance, a Master File should include written descriptions of important drivers of business profit, the supply chain for the five largest product lines, major service agreements within the group, and an explanation of which companies own intangibles by country. By contrast, a Local File for each country, requires a thorough explanation of local business strategies, functions, risks and assets. Each Local File must also include an explanation of inter-company transactions, financial results and selection of the “Best/Most Appropriate Method” for bench marking transfer prices.
What to Do Next?
Taxpayers of all sizes should review their transfer pricing arrangements in anticipation of a potential audit. Companies with U.S. distribution subsidiaries can expect additional transfer pricing scrutiny as a part of every IRS tax audit. Depending on the risk profile of a company, transfer pricing documentation or other supporting economic analyses may be necessary to justify operating results and reduce the risk of additional tax assessments and penalties.
The IRS has published a Transfer Pricing Audit Roadmap which can be viewed here: https://www.irs.gov/businesses/corporations/transfer-pricing-audit-roadmap-now-available .
This article was written by Hanne Rørholm LeLoup and Alex Martin. Hanne LeLoup is a Partner with Hutchinson and Bloodgood LLP, http://www.hbllp.com/ in San Diego, California. HBLLP is a full-service CPA firm. Hanne grew up in Denmark and assists numerous Danish companies with their American tax issues. Hanne can be reached at email@example.com . Alex Martin is a Transfer Pricing Expert at Clayton & McKervey in Detroit, Michigan, https://claytonmckervey.com/. Alex can be reached at firstname.lastname@example.org .
On April 18, 2017, President Trump signed his latest Executive Order “Buy American and Hire American.” The American Immigration Lawyers Association (AILA) observed that while the announcement reflects the administration’s desire to move toward reforms to the H-1B program, there will be no immediate changes or impacts on H-1Bs. It appears that the agencies are asked to review policies related to all visa programs and recommend changes to root out “fraud and abuse,” and to propose additional reforms so that H-1B visas are awarded to the most skilled or highest-paid applicants.
See the official White House announcement here: https://www.whitehouse.gov/the-press-office/2017/04/18/presidential-executive-order-buy-american-and-hire-american
Starting April 3, 2017, USCIS will temporarily suspend premium processing for all H-1B petitions. This suspension may last up to 6 months. We will notify the public before resuming premium processing for H-1B petitions. While premium processing is suspended, we will reject any Form I-907 filed with an H-1B petition. If the petitioner submits one combined check for both the Form I-907 and Form I-129 H-1B fees, we will have to reject both forms. Read more here: USCIS Will Temporarily Suspend Premium Processing for All H-1B Petitions and here USCIS Newsletter .
Martensen Wright PC was represented by Ebba Josefson at the Tech Forecast 360 event in San Francisco on February 8, 2017. The event was hosted by the Silicon Vikings, http://siliconvikings.com/.
Key note speakers included Scott A. Anderson, Chief Economist at Bank of the West; John Chiang, California State Treasurer; Sean Randolph, Senior Director of the Bay Area Council Economic Institute; Bill Reichert, Managing Director of Garage Technology Ventures; Carl Fritjofsson, Principal at Creandum; Christian Lagerling, Co-Founder & Senior Advisor at GP Bullhound, and Barry Broome, President & CEO of Greater Sacramento Area Economic Council.
The speakers shared their point of view on how the new White House administration will impact the tech economy in the Bay Area and California and Nordic companies seeking to enter the US. Here are some of the highlights:
• Most speakers agreed that the cost of housing and a general housing shortage, especially in the Bay Area, are central issues for the tech economy and the economy of California. In the near future the aim to create affordable housing may be negatively impacted by the new administration’s tax policies. (more…)
Dorthe Mikkelsen Wright and Edward Wright attended The Business of Racing with Champion Ferrari Driver Christina Nielsen. A big thank-you to the Danish Chamber of Commerce Southern California for hosting this exciting event. Christina is the first Danish female driver in the 24-hour Le Mans race and the first female driver to win a professional, full-season Sports Car Championship.
Martensen Wright wishes all our clients, friends and acquaintances a Merry Christmas and a Happy New Year. We thank you for your patronage in 2016 and look forward to being of service to you in 2017.
Our office will reopen Tuesday, Dec. 27 following the Christmas holiday. We know that work continues for many of you; be assured that your matters will receive our prompt attention upon our return on the 27th.
In the meantime, if you are inclined to follow the efforts of another busy soul over the holidays, the North American Aerospace Defense Command (NORAD) tracks Santa’s journey and you can follow along at http://www.noradsanta.org/ or on Twitter @NoradSanta.
Sorry, no Nisse report available at present!
In May 2016, President Obama directed the U.S. Department of Labor to update overtime pay regulations with the publication of The Final Rule, https://www.dol.gov/whd/overtime/final2016/, affecting many U.S. employers and employees. The Final Rule was to take effect on December 1, 2016.
Federal law requires that employers pay overtime wages to all employees unless the employee is considered “exempt” from overtime regulations. The Final Rule increased the minimum annual salary for exempt employees to $47,476. Under the new rule, many employers would be required to either increase the salaries of these employees or change their classification to “non-exempt”, thus making them subject to overtime pay. Many employers therefore took the opportunity to reevaluate the exemption classification of their employees.
Shortly before the Final Rule was to take effect, a federal court temporarily blocked the rule pending further order by the court. https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/what-to-do-now-that-federal-overtime-rule-is-blocked.aspx.
Danish Nationals living in the United States now enjoy the option of having dual citizenship.
This means that Danes can apply to become US citizens via naturalization in the USA without losing their Danish citizenship. The Application for Naturalization, form N-400 is available here: https://www.uscis.gov/n-400
Danes who lost their Danish citizenship when they became citizens of another country prior to September 1, 2015, can apply to have their Danish citizenship reinstated. For more information about Citizenship [in Danish statsborgerskab og indfødsret] please see www.statsforvaltningen.dk and http://www.statsforvaltningen.dk/site.aspx?p=8903 .
The application, Erklæring om Generhvervelse af Dansk Indfødsret for Tidligere Danske Statsborgere, is available here http://www.statsforvaltningen.dk/sfdocs/Andre%20omr%C3%A5der/Indf%C3%B8dsret/20150901/Erkl%C3%A6ringsskema%20-%20dobbelt%20stb%20%C2%A7%203.pdf
Questions about the application should be directed to the State Administration at phone no.: 011 45 72 56 70 00 or via e-mail: email@example.com