Many Chinese investors are interested in the EB-5 visa program.
Under China’s current currency laws, a Chinese citizen is allowed to make only a single outgoing transfer of $50,000 USD per person annually. This restriction of outgoing transfers abroad makes it difficult for investors to legally transfer funds for their EB-5 investments in the United States. According to the EB-5 visa program, investors are required to invest $500,000 to $1 million USD to a business or regional center in the United States. Lately, Chinese investors are experiencing practical difficulties with foreign currency transactions. There have been many recent examples of investors, economists, journalists, businessmen and financial players reporting significant scrutiny by China for regarding foreign currency outflows. Even if the rule of law did not change, there has been much more control and scrutiny of Chinese banks regarding foreign investment and currency outflows. For example, there have been several complaints recently regarding transfers of money that take more time than expected, which makes the transactions unpredictable and harms businesses. This regulatory trend has been seen in all kinds of legitimate transactions involving getting money out of China. These delays and complications must be into consideration when considering getting money out of China. There are different ways to get money out of Mainland China into the United States. One way is for investors to get assistance from family, relatives, and friends. For example, the investor can transfer money in China to relatives. These relatives can then transfer sufficient funds in USD into the investor’s designated account. Because there is no taxable gift in China, it is common for Chinese investors to transfer $50,000 annually per person through 10 or 20 Chinese citizens. This solution is not without complications, however. Besides the challenge of finding 10 or 20 relatives or trustworthy friends, the investor must prove the source of funds with bank statements showing the transactions – from the investor account to the relative – from the relative to the US account – from the US account to the regional center or to the new business. The Chinese government has started to restrict the amounts of cash that can be moved this way when a single account abroad receives money coming from multiple sources in China. A transfer of the money from Hong Kong is another way to get money out of Mainland China for EB-5 investors. After opening a bank account in Hong Kong, the investor go to a money-change shop, which provides a mainland bank account number for the customer to make a domestic transfer from his or her account inside China. Then, the equivalent amount of money from the domestic transfer is transferred in Hong Kong or a foreign currency into the client’s Hong Kong account. If a third party’s account is used, it must be proven by an affidavit explaining the operation established by the third party involved. Another legitimate channel is to get an approval from the State Administration of Foreign Exchange to transfer more than $50,000. This path is difficult and requires the assistance of a skilled Chinese attorney. Another method is for the investor to take out a loan. A loan can be a home equity loan or a loan through the investor’s own business. In such a case, the investor has to demonstrate that the investor acquired the loan through the investor’s personal or real property. In the case of a home equity loan, the investor must provide both the loan documents and documents of home ownership to demonstrate the source of the loan. In China, real estate property requires several certificates from different government authorities. A document showing the value of the real estate is also important to establish the legitimacy of the loan. If the loan is from the investor’s own business, then the investor must provide proof of ownership of the company share, board of director approval, and payments on the loan. Overseas home purchase can also be a legitimate way of getting foreign currency. Banks like the China Construction Bank Corp enables clients to borrow Hong Kong dollars by using Yuan or mainland assets. There are also other, more controversial, methods that are commonly used by Chinese investors, including carrying a check from an underground bank or paying with a UnionPay credit card overseas to buy an expensive item from a merchant who allows the item to be immediately returned and reimbursed in cash. It is not advisable to transfer funds in this manner, however, since these transactions make proving the source of the funds difficult. Regardless of methods of transfer, demonstrating the origin of funds holds the key to the strength of investor’s EB-5 application. The investor must trace and demonstrate the chain of each wire transaction from the investor’s account to, ultimately, the Regional Center or new investment project. The investor should have copies of bank statements that show the transfers between all the accounts involved, which also include the bank statements of the people who assisted the investor in transferring the money. It is necessary to not have any gaps in tracing funds. If gaps do exist, it is necessary to get an affidavit from any third party to fill in the gaps. Using affidavits to fill in gaps is not ideal, however, as this may cause delays or even lead to rejection even though the money has been transferred to the United States. If the funds come from inheritance or gifts, it is necessary to provide copies of wills, sales of real estate, a copy of relevant tax documents. The origin of an individual’s personal funds, meanwhile, must be shown with evidence like copies of income tax filings. Given the complexity of these issues, it is important to consult with an immigration attorney who can assist with strategic planning and documentation of the legal source of funds.