By Austin T. Fragomen, Jr. and Chad Ellsworth of Fragomen, Del Rey, Bernsen & Loewy, LLP
The Canadian government’s recent decision to terminate two key visa programs for immigrant investors has left many foreign investors needing to explore other jurisdictions for immigration and investment opportunities. The Canadian government’s termination of the Immigrant Investor Program (IIP) and the Federal Entrepreneur (EN) Program is a significant departure from the global trend of expanding and enhancing investor immigrant programs, including the U.S government’s recent initiatives to attract global talent and capital through a much improved EB-5 investor immigrant program.
Under Canada’s IIP program, the federal government offered permanent residence in exchange for a guaranteed $800,000 loan (before 2010, the amount was only $400,000). Additionally, the EN Program provided a pathway to permanent residence for applicants with demonstrated business experience; a minimum net worth of $300,000 CDN; and who had managed a qualifying Canadian business within three years of becoming a permanent resident that created one full-time job for a Canadian citizen or permanent resident, and who earned sufficient points in selection factors such as education, proficiency in official languages, age, etc. Rather than increase the investment and commitment amount, such as the United Kingdom, Australia and New Zealand (which require at least $5 million and do not offer up-front permanent residency) the Canadian government terminated its federal programs and indicated it will replace the programs with more focused pilot programs.
It is unclear how the approximately 60,000-applicant backlog will be processed by the Canadian government moving forward. In announcing the termination, the Canadian government indicated it intended to return and refund “certain” IIP applications submitted before February 11, 2014; however, there is no clear guidance on how the government will process and/or terminate the enormous backlog. The Canadian government may ultimately agree to process the applications from investors committed to loaning $800,000 instead of the $400,000 required before 2010. However, there is no guarantee; the vast majority of the backlogged applications may ultimately be terminated – creating an urgent need for foreign investors to consider other country options.
While formerly not a premier option, recent U.S. administrative developments and activity signal an interest in boosting foreign investment and job creation through the EB-5 Immigrant Investor Visa Program. The U.S. EB-5 program permits foreign nationals who invest as little as $500,000 and employ 10 people in a rural or economically disadvantaged part of the U.S. to secure an immigrant visa, which can lead to a permanent green card after an initial two-year conditional period during which the principal investor and immediate family members can immediately live and work in the United States.
Recently, there have been major changes in the way EB-5 cases are adjudicated and visa numbers have become readily available. The EB-5 program is now being centralized within the Immigrant Investor Program Office in Washington, D.C., where petitions are adjudicated by economists, and where senior USCIS officers serve as case managers to oversee the caseload. Additionally, one of the U.S. government’s new goals is to promote ongoing communication between EB-5 adjudicators and petitioners/counsel, with the likelihood that all of a petitioner's EB-5 filings will be handled by a single adjudicator moving forward. The U.S. government is also looking to implement an electronic filing process featuring an online application system capable of handling a large filing volume and multiple complex supporting documents.
Current USCIS statistics support the U.S. government’s increased enthusiasm and support for the EB-5 programs as a vehicle to improve the U.S. economy and job creation. A review of the most recent USCIS statistics shows that there has been a steady and significant increase in I-526 filings (the initial and most difficult application in the two-step EB-5 application process) between 2005 and 2012. In short, the EB-5 program is an attractive alternative for sophisticated foreign investors seeking an investment program designed with a range of investment thresholds, clear and consistent administration, and pathways to permanent residence that reflect business realities.
Other countries have options for foreign investors, including those stuck in the backlog, but most require upfront investments that are pricier and therefore less attractive. For instance, applicants for British permanent residency can invest £1 million – 80 percent in treasury bonds and the remainder in either real estate or in a local savings account, provided that program participants spend at least half the year in Britain. Conversely, some European countries severely affected by the euro crisis, such a Latvia, Greece, Portugal and Cyprus, are offering residency to wealthy investors for as little as an $100,000 investment in real estate. Residency in one European jurisdiction can eventually lead to visa-free travel within the European Union, a significant benefit to many global immigrant investors, including Chinese foreign nationals.
In summary, any foreign immigrant investor, particularly those stuck in the Canadian backlog, should consider the U.S. EB-5 program or other European options. In today’s highly competitive global economy it is imperative that countries design immigration programs that encourage job creation and economic growth through the encouragement of foreign investment. The Canadian government’s recent announcement is an outlier in the global expansion of foreign investor programs and applicants stuck in the backlog only need to look next door to find an attractive alternative.
Submitted by Fragomen