hey everyone welcome back to my channel this is Adrien pandev business and immigration attorney and today we're going to talk about the E2 visa and taxes so question I get very often from clients perspective clients okay so I'm considering applying for an E2 Visa already have an E2 Visa I'm in the US how do taxes work do I have to pay taxes in the US well short answer to your question do you have to pay taxes yes you're going to have to pay taxes however what taxes um is the big question and to put it
very bluntly the E2 Visa allows for a lot of tax planning because you're not automatically treated as a US tax resident by obtaining an E2 Visa so let's break this down and and explain how these rules work and how they may impact you on an E2 Visa so the bottom line is if you're a US tax resident right now keep in mind tax being a permanent resident under the tax code is not the same as under the immigration and nationality act but if the tax code treats you as a resident a taxpayer a permanent resident
you will have to pay taxes on all your worldwide income it doesn't matter if it's derived from the US if you have businesses abroad Investments abroad Etc you will pay us income taxes on those as well um obviously there's this is a fairly complex area where there's ways to minimize those tax liabilities but generally speaking your tax resident you will pay income tax on the entirety of your worldwide income not just the US sourced income if you are a nonresident right so if you're treated as a non-resident under the tax code well then you will
only pay us income taxes on us sourced income so how does this apply to the E2 Visa well the bottom line is as a non-immigrant Visa which the E2 is you're not automatically you don't automatically become a US tax resident by obtaining the Visa this is in sharp contrast to permanent residents right to a green card where you automatically by becoming a permanent resident become a us um tax resident for um income tax purposes now the how do we establish whether or not um you become a US tax resident with an E2 Visa so the
way works is that there's a substantial presence test so the way the substantial presence test calculation works is it looks at whether you've spent 30 days at least 30 days in the current tax year at question within the US and then whether or not you've spent 183 days in the US in the last three tax years now the calculation is not that simple because the way it works is that each day is counted as one day in the current year but but each day is counted as a 1/3 of a day in the prior year
and then one sixth of a day in the 2 years prior year right for the total of the three years to be very um Frank with you given the importance of paying taxes properly and paying the required amount and planning everything out in a way that it's most efficient to you um when it comes to conducting this test I advise everyone to work with their tax advis adviser right whether it's your tax attorney CPA whoever is advising you on taxes it is critical that you do this calculation properly because if you are a if you
satisfy the substantial presence test and you're ear an E2 Visa it doesn't matter that you have a home abroad it doesn't matter that you spend several months out of the Year abroad you will be a us tax resident and now you have to pay taxes on your worldwide income to the IRS right to the US so let's look at the flip side right if you're on an E2 Visa you hold an E2 visa and you do not satisfy the substantial presence test well then you're a nonresident for tax purposes what this allows you to do
is to file a nonresident income tax return which allows you to not include that worldwide income into your us tax return and you will not be paying taxes on it please note you will still be paying taxes on us sourced in income so any bu any income from your E2 business from the US you're going to still pay us taxes on Now One very important thing to note about this is that this provides for an amazing tax planning opportunity I can't stress to you enough how important this tax aspect of your E2 Visa is what
I find is that a lot of individuals are so happy they finally get this E2 Visa they're finally able to start their us business they're finally here working on making their dream of owning a US business a reality and because they don't have to pay taxes immediately because you don't file tax returns immediately when you start the business you do it in the year the following year right um they kind of ignore this or don't prioritize this and then what happens is they reach out to a whether it's a CPA or other Tax Advisor to
quickly prepare their tax return and they've done no tax planning and then it's impossible to actually strategically um create a plan where a it's compliant right all the relevant tax rules are met all the compliance reports everything because there's more to this than just income taxes right so to make sure your tax returns are done exactly in the most compliant way possible but also having a tax plan where you are only paying taxes on the required income and not overpaying right your takeaway from this video should be that you do not become a US tax
resident that has to pay income taxes on worldwide income immediately upon receiving that E2 Visa there's an additional analysis that needs to be done and then whether or not you should be filing a um non-resident return or a resident return and whether or not there's additional tax structuring that needs to be done to limit your tax liability obviously lawfully um because of that make sure you reach out to a tax adviser a tax planner early so that all of this can be done efficiently I um very often depending on the on the type of case
and and the client's goals usually start from this analysis before we form any companies before we do any of the company formation and the structure well before we even get to the investment and the E2 Visa because if you set this up all properly in the beginning then you do not have to SC scramble and restructure things given that your Visa is linked to one of those entities it just becomes a very burdensome Endeavor so bottom line is make sure you're thinking about taxes at the beginning of your E2 journey and not at the end
and make sure you're on top of it thank you so much for watching this video I hope it was helpful Please Subscribe and like um the video because it's super helpful to me and I'll continue to post hopefully helpful information to you thank you [Music]
