Canada Terminates Inefficient Investor and Entrepreneur Programs – An Opportunity for the EB-5 Program in the US?

 Canada’s Citizenship and Immigration Ministry recently announced the government’s intent to terminate the federal Immigrant Investor Program (IIP) and Federal Entrepreneur (EN) Program, which would eliminate a large and longstanding backlog of applications.

Under the Immigrant Investor Program, Canada offered  guaranteed permanent residence in exchange for a guaranteed $800,000 loan (before 2010, the amount was only $400,000). The United Kingdom, Australia and New Zealand require as much as $5 to $10 million, and do not offer up-front permanent residency. Last year, the UK initiated an entrepreneur visa designed to create jobs. Canada intends to design a new pilot program that will actually meet Canada’s labor market and economic needs-it has been commentated that the new program would encompass job creation and economic stimulation, perhaps with the EB-5 program in mind.

China "has been among the top sources for more than a decade" said Canadian Citizenship and Immigration Ministry in a written interview. The current program has an inventory of more than 65,000 persons, larger than any other economic immigration program. At current levels, it would take more than six years to process this inventory. 70% of the 65,000 are Chinese investors. These pending applications will be returned and the investment refunded.

It will be a great opportunity for the EB-5 Program in the United States. Sun Zhe, director of the Center for US-China Relations at Tsinghua University, said: "Canada's policy updates will hardly deter Chinese investor immigrants as a whole."

The reason for terminating the current Immigrant Investor Program is that the said program provides limited economic benefit to Canada. Research shows that immigrant investors pay less in taxes than other economic immigrants. Over a 20-year career, an immigrant investor pays about $200,000 less in income taxes than a federal skilled worker and almost $100,000 less in taxes than one live-in caregiver.

The immigrants are often less likely to stay in Canada over the medium- to long-term and often lack the skills, including official language proficiency, to integrate as well as other immigrants from the same countries.

Eliminating the IIP and EN programs – and the associated backlog of applications – will allow the Canadian government to focus on attracting experienced business people and raising investment capital that is of maximum benefit to Canada’s economy.

It would not be surprising that majority of the applicants from the Canadian Immigrant Investor Program will place the investment in the US under the EB-5 program, a more efficient program by comparison. Under the EB-5 program, the investor invested $1 million dollars or $500,000 (theoretically in a rural area or high unemployment area), the permanent residency is not guaranteed by “at risk” and the investment must create jobs for the US economy.

The EB-5 program in the US grants 10,000 entrepreneurs visa and homes approximately 3,000 investors (and their spouse and unmarried children under 21) per year. The Comprehensive Immigration Reform may increase the number. The 65,000 potential investors from the Canadian program provide an accessible source for all EB-5 stakeholders.

 Yi Song is an attorney at Mona Shah & Associates focusing on EB-5 and securities law. She is admitted to practice law in New York and People’s Republic of China. She has authored many published articles on EB-5 financing and securities law. She practiced tax law in China and has experience in class action securities litigation cases. Yi is a graduate from Georgetown University Law Center in Washington, DC.

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