CONTROLLED FOREIGN
E NTITIES: Companies controlled
by individuals who plan to move
to the U.S. and become U.S. tax
residents are considered controlled
foreign entities. For these entities, in
addition to the election of treatment
mentioned before, there is the option
to defer income taxation in the U.S.
by interposing a U.S. corporation, if
earnings and profits are reinvested
in business activities.
"There are strategies
to remove assets from
the U.S. estate and gift
taxation if they are
implemented prior to
moving to the U.S."
taxation if they are implemented
prior to moving to the U.S. One option
is to gift assets to beneficiaries
before the move. Another is to set
up an irrevocable trust. Families
may also choose to purchase a life
insurance policy to cover the future
estate tax liability, or a combination
of all these strategies.
IT’S NEVER TOO SOON
TO START PLANNING
FOREIGN MUTUAL FUNDS: Special attention should be
given to foreign mutual funds. Those are usually considered
Passive Foreign Investment Companies (or PFICs) in the
U.S. PFICs are heavily taxed – if no special election is or
can be made, the U.S. will tax income arising from PFICs at
the highest individual income tax rate during the period in
which the taxpayer held shares of the PFIC while a U.S. tax
resident. This rate is currently at 37%. Given the significant financial impact of U.S. taxes on an
individual’s foreign income and assets, planning prior to the
move is imperative. It’s never too soon to start planning.
Some strategies may need to be implemented at least 2
years prior to the move to be effective and accepted by the
IRS.
ESTATE TAX PLANNING Cristina S. Teixeira is the founder
of 2A International Tax Advisors, with
offices in Miami and Sao Paulo, Brazil. She
specializes in U.S. tax advisory services for
international clients seeking to relocate to
or invest in the U.S. She also has expertise
in tax matters in all major Latin American
countries and the U.S., where she is a
certified public accountant and trust and
estate practitioner. Teixeira has a bachelor’s
degree in business administration and a post-graduate degree from
Fundacao Getulio Vargas in Brazil.
Another aspect of concern when moving to the U.S. via the
EB-5 route is the estate tax. Green card holders are usually
considered to be domiciled in the U.S. As a result, all their
worldwide assets are subject to estate and gift tax in the U.S.
The tax rate is 40% for assets valued over $1 million.
There is currently a lifetime exemption of approx. $11.6
million per person 1 . This means that only assets valued over
this threshold will be subject to the U.S estate and gift tax at
40%.
For families with a substantial level of wealth, there are
strategies to remove assets from the U.S. estate and gift
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EB5 INVESTORS M AGAZINE
Sources:
1
This limit is expected to be reduced by half in 2026, as per current US legislation.