Direct EB-5s in the spotlight as EB-5 becomes more expensive for Brazilians


On December 31st the Brazilian Tax Authority let a tax exemption lapse that allowed Brazilian nationals to transfer funds abroad without incurring a 25% tax imposed at the time of transfer of the funds.

Several categories of transfers benefited from this exemption such as funds transferred from Brazil to pay for educational expenses abroad. In spite of the growing interest in transferring funds abroad, the lapse of the exemption comes at a time where the cost of the dollar for those earning reais (name of the Brazilian Currency) has skyrocketed, making it almost 75% more expensive for a Brazilian national earning reais to invest in the EB-5 program[1].

Honorable Judge Newton Azevedo[2], a retired judge and current EB-5 investor from Brazil residing in Orlando, believes that a sleigh of emergency injunctions against the imposition of the transfer tax is to be expected. Unfortunately, the slow-pace of the Brazilian Legal System won’t allow for a fast resolution to the disputes.

When Brazil first appeared on the EB-5 map, around 2012, the cost of US$ 1 was approximately R$ 1,79. Currently the cost of US$1 is at R$ 4,40, and financial specialists expect it to reach R$ 5 by the end of 2016.

In spite of the steep increase in cost of EB-5 for Brazilians, the interest in EB-5 investments has continued to enjoy exponential growth. In the past, EB-5 investors from Brazil would move to the USA through a passive EB-5 investment while they received revenue from their business activities in Brazil. As a result of the economic and political crisis in Brazil, Brazilian EB-5 investors are now looking to become Direct EB-5 investors in revenue creating opportunities as a tool to help subsidize their lifestyle in the USA. Franchises and food based opportunities are on the top of the list of industries chosen by Brazilian investors, with Florida being their first preference for location.

[1] If factoring in the higher cost of the dollar and the impact of the taxation imposed at the time of transferring funds.

[2] Honorable Judge Newton Azevedo invested in the Baptist Hospital Project sponsored by the Sunbelt Regional Center in Alabama.

Reprinted with permission.

About The Author

Renata Castro, Esq. ,who is brazilian, is a project manager with Jafrejo Holdings, a hospitality developer and operator with several EB-5 projects. Renata is also an immigration attorney with Korda Burgess,P.A.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.