By Kate Kalmykov and Ali Brodie
It is well-known that USCIS typically requires evidence that the investor (and related parties) have paid taxes for at least five years preceding the time of I-526 petition filing. Vietnamese investors filing EB-5 I-526 petitions should be aware of the implications relating to Vietnamese tax laws. On January 1, 2009, the Law on Personal Income Tax, which subjects earned income to personal income taxes, took effect in Vietnam. Prior to 2009, Vietnamese citizens were not required to pay personal income taxes on earned income.
This change in Vietnamese tax policy will come into play when preparing an investor’s source of funds analysis. By way of example, if the source of one’s investment is derived from salary or accumulated income, there will be no income tax documents prior to 2009. Additionally, if income is used when purchasing a property or shares in company, there will again be no taxes prior to 2009. However in the same scenarios, it is critical to request tax filing statements for income earned/assets acquired after January 1, 2009.
Following enactment of the law in 2009, income derived from the sources below is subject to personal income tax regulation:
- Employment
- Household Business Operation
- Capital Investments
- Capital Transfers
- Real Property Transfers
- Winnings or other prizes
- Royalties
- Franchises
- Inheritance
- Gifts
In practice, USCIS often sends Requests for Evidence (RFE) for lack of five years of tax returns. Therefore, it is important for both Vietnamese EB-5 investors and their counsel to be aware of the January 1, 2009 Law on Personal Income Tax and the implications this change in tax policy may have for EB-5 petitions. Additionally, it is recommended that investors and counsel document this change in tax law in any Vietnamese I-526 filing, thereby explaining to USCIS that prior to 2009, taxes on personal income were not required under the Vietnamese tax code.
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