Risky process

In 2008, following in the footsteps of other immigrant investors from his hometown, Yiwu, Zhejiang province, a hotbed for private entrepreneurs, Zhang made an investment in the US and applied for the EB-5 visa.

The visa, created by the Immigration Act of 1990, provides conditional permanent residency to foreign nationals who invest a total of $1 million in the US, or at least $500,000 in an area with a depressed employment rate, and create or preserve at least 10 jobs. After the applicants successfully prove that 10 jobs have been maintained or created, a green card is issued.

A total of 2,969 Chinese people applied for the EB-5 visa in the fiscal year that ended Sept 30, accounting for three-fourths of the total applicants, according to figures released by the United States Citizenship and Immigration Services (USCIS). In 2007, only 270 people from China applied.

The process is not without risk. The US government, unlike other emigration destinations, does not guarantee against investment loss, which means that applicants might lose their seed capital and, in some cases, eligibility.

"We rarely take US immigrant investor cases as there are significant uncertainties," Ma Yuan, a consultant with East J&P Star, told China Daily.

"We mainly deal with Canadian immigrant investors as the return of the seed capital is guaranteed. For US cases, a contract has to be signed and we cannot guarantee the investor's seed capital," Ma said. "As a result, we rarely proceed with US cases."

Despite the risks, Zhang applied, convinced the US would offer his two daughters the best education, and received his green card in October.

But he was quickly frustrated by the frequent travel between China and the US, his inability to communicate in English and the vast culture gap, which he struggled to narrow.

"I was deaf and dumb in the US. I told my wife I was inviting bitterness upon myself," Zhang said.

Some emigration consulting companies, fearful of losing business, did not fulfill their obligation to fully inform applicants of the tax burdens as a US immigrant, Qi said.

But that was not Zhang's case."I was told of the risk of application rejection as well as the tax obligations. But not until I lived there did I keenly experience the words I was told," he said.

Unaffected majority

But for the majority of emigrants who study and work in the US, they are unaffected by the FATCA requirement.

Huo Xiaoyuan, who currently works at the branch of a multinational insurance company in Chengdu and expects to acquire a green card soon, said she is not bothered by the FATCA as her assets do not meet the reporting threshold.

Having studied and worked in the US for 10 years, she said the reporting obligation was not new to her. Even if her assets meet the FATCA conditions someday, she will not be concerned, she said.

However, unlike Huo, most Chinese nationals are not used to having taxes imposed on them, according to Qi.

"In China, people consider tax to be a moral issue, whereas in the US, it's a legal issue," Qi said.

However, Chinese nationals can take some comfort from an agreement between China and the US to avoid double taxation. Huo said she plans to offset some of her US tax obligations with the Chinese taxes she already paid.

Huo admitted that some of her friends were fearful that their overseas assets would be exposed to the IRS and decided that their spouses would not apply for US residency or transfer their assets to their parents, as the common assets of a couple are also subject to US tax.

One of Huo's friends in the US had initially planned to test the IRS and not report his property and bonds in Taiwan, which were inherited from his mother.

"I think reporting honestly is the rational option for him, because the punishment for failing to report is too expensive to bear," Huo said.

According to the IRS, taxpayers who duck the new reporting requirement could face up to $50,000 in penalties and also be sent to prison if found to have done so intentionally.

Frustrated by the inconvenience, Zhang said he is already considering giving up his green card, even if it means losing the large amount of money he had invested.

But according to Qi, even a loss of US permanent residency does not mean Zhang can evade his tax obligations, as assets and income earned for the five years before green card abandonment are required to be reported.

"Hopefully, the zeal to emigrate will dampen a little and people can apply for EB-5 visas more rationally," Qi said.

Zhao Yanrong and Qin Zhongwei contributed to this story.

China Daily