By Alon Harnoy, Esq. and Leyna Sultan, Foreign Legal Intern
There has been a great deal of attention lately on changes to US immigration policy by the Trump administration. What people are less aware of are important developments in the immigration policy between the United States and Israel that significantly reduce the requirements for Israelis to obtain a US Visa through investment. Israeli citizens are on the verge of being granted access to the E-2 Treaty Investor Visa which would permit Israelis to enter and work in the US upon investing a substantial amount of capital in a US business, an amount that in some cases can be as low at $100,000.
The process of making the E-2 Visa available for Israeli nationals began in 2012 at the initiative of President Obama, who signed legislation implementing a bilateral investment treaty with Israel that required Israel to provide reciprocal immigration status for American investors. It was only in August 2014 that the Israeli Government approved the reciprocal agreement creating a B-5 Investor Visa for US citizens who wish to enter and work in Israel. According to the Israel-America Chamber of Commerce, the Israeli Government recently gave its approval to all required reciprocity changes to its B-5 Visa, thereby clearing the way for the US E-2 Visa availability for Israelis. The US Embassy in Israel’s affirmed that they will issue a press release as soon as the E-2 investor visa is available to Israeli nationals. Based on their website, the E-2 Visa should be available in a couple of months although several practitioners have been talking about a release date in March 2017.
While the E-1 Visa program has been in place for decades, Israel was not on the list of the E-2 Visa applicant countries until 2012, whereas 80 countries, including Mexico, Canada, and Japan have been E-2 eligible for many years. The E-1 Visa allows Israelis to come to work in the US for a company that has 50% of its products imported from Israel. However, this Visa does not permit an Israeli to open nor invest in a US business and run it from the US. Therefore, the E-2 Visa provides significant benefits to applicants over the E-1 Visa in that it allows managers, executives, and essential skilled employees, and their families, to live and work in the United States. In addition, it includes employment authorization for the applicant’s spouse to work in the U.S. for companies other than the company being invested in.
To qualify for E-2 classification, the treaty investor must have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise in the United States. An investment is the treaty investor’s placing of capital, including funds and/or other assets, at risk in the commercial sense with the objective of generating a profit. The capital must be subject to partial or total loss if the investment fails.
A substantial amount of capital is (i) substantial in relationship to the total cost of either purchasing an established enterprise or establishing a new one, (ii) sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise, and (iii) of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. The lower the cost of the enterprise, the higher, proportionately, the investment must be to be considered substantial. This means that there is no minimum required investment for an E-2 Visa. The US Department of State Foreign Affairs Manual Handbook notes that there are no bright line percentages that exist in order for an investment to be considered substantial, however, in explaining the proportionality test they note that investments of 100 percent or high majority percentages would normally automatically qualify for a small business of $100,000 or less. At the other extreme, an investment of $10 million in a $100 million business would likely qualify, based on the sheer magnitude of the investment itself.
A bona fide enterprise refers to a real, active and operating commercial or entrepreneurial undertaking which produces services or goods for profit. It must meet applicable legal requirements for doing business within its jurisdiction. A speculative or idle investment would not qualify.
Therefore, the substantial investment must generate significantly more income than just to provide a living to the investor and their family, and/or it must have a relevant economic impact in the United States. If an investor plans to actively manage a business in the US and/or to have US employees, he would be making a substantial investment, and thus should be eligible for an E-2 Visa.
The addition of Israel to the list of eligible applicant countries should be well received by Israelis, and, upon its effectiveness, we expect to see many Israelis investing substantial amounts in the US in order to obtain an E-2 Visa.