The Most Common Reasons for E-2 Treaty Investor Visa Denial: A Case Study

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Davies Legal Immigration uses a case study to explore the most common reasons for E-2 Treaty Investor visa denial.

Davies Legal Immigration

It is, as a point of practical pertinence, never advisable that applicants take steps to relocate ahead of visa issuance.

On February 20, 2018 it was reported by Aspen Daily News that the purchasers of a small café in the United States had been denied E-2 Treaty Investor visas. The couple had reportedly invested $48,000 in the purchase of the café, sold their residence abroad and shipped their possessions to the US, in the belief that their E-2 visa application was likely to be granted. In circumstances such as these, an E-2 visa denial must, without doubt, be devastating. However sadly across the globe, E-2 visa denials are not uncommon.

In this article, Davies Legal Immigration will examine the E-2 qualifying criteria and identify a number of reasons why the E-2 visa application may potentially have been denied in this case. We will assume, for the purposes of this article, that the filing requirements were met.

1.    Issue 1: Was the Investment Substantial?

In order to qualify for the E-2 Treaty Investor visa, the investor must demonstrate, inter alia, that they have invested a “substantial amount of capital” in a US enterprise.
In order to determine if the investment in question is “substantial”, the US Embassy will apply a “proportionality test”. In short, the US Embassy will compare the level of capital invested in the US enterprise with the level of investment required to render the business operational. If sufficient funds have been invested to render the business either operational or close to operational, the investment will be considered “substantial”, provided the level of investment itself is reasonably high. If one was to invest $5000 setting up a hotdog stand business on Broadway, for example, the investment would not be considered “substantial”, due to the low level of the initial investment, even if sufficient funds had been invested to render the business operational.

In this case, it would appear that the couple invested $48,000 in the small café business. At first blush, it would seem there is a real possibility the level of investment may not have been considered “substantial” for the purpose of an E-2 visa application.

In determining the overall investment figure, the US Embassy will consider only qualifying items of expenditure including, inter alia, the business purchase price and inventory. The US Embassy will not consider, for example, sums spent shipping personal belongings to the US for non-commercial use or any funds spent renting a private residential property for the investor’s personal, non-commercial dwelling. It is vital, when preparing an E-2 visa application, to ensure that the overall investment figure has been calculated only with reference to qualifying investments.

Moreover, when assessing the overall level of investment, the US Embassy will consider only items of expenditure made using “qualifying funds”. When filing an E-2 Treaty Investor visa application, the applicant must demonstrate that their investment places “lawfully acquired, owned, and controlled capital at commercial risk – with a profit objective – and such capital must be subject to loss if the investment fails."

In summary, items of expenditure funded by finance will count towards the overall investment figure only if secured against the investor’s personal signature or against the investor’s personal assets. Any items of expenditure funded by debt secured against the US enterprise will be disregarded for the purposes of the E-2 visa application.

In this case, if the $48,000 investment figure included non-qualifying items of expenditure (for example, the cost of shipping the applicant’s personal belongings to the US), there is a risk the overall level of investment was not considered sufficiently “substantial” to warrant the grant of an E-2 visa. Similarly, if any items of expenditure were financed using debt secured against the US business, they would not have been considered in the computation of the overall investment total.

While the E-2 qualifying criteria may appear onerous, it is noteworthy that with legal advice and a carefully planned investment strategy, it is possible for an investor to invest a “substantial” figure in a US business and thereby qualify for an E-2 Treaty Investor visa, while minimizing his financial expenditure and risk exposure.    

2.    Issue 2: Was the Business Marginal?

When adjudicating upon an E-2 Treaty Investor visa application the US Embassy will consider, inter alia, if the US enterprise in question is a “marginal” business – that is to say, a business created, purchased or operated purely for the purpose of providing an income to the principal investor and his or her family.

The E-2 Treaty Investor visa category arose from the Bilateral Treaties of Commerce and Navigation between the US and various countries around the world. The purpose of the treaties was to encourage foreign investment in the US, in order to stimulate financial growth and generate greater employment opportunities in the US.

As a result, it is essential, when filing an E-2 visa application to demonstrate that the US enterprise in question will generate wealth and employment opportunities within the local community and will not simply provide a modest income for the investor and his family.

In this case, the café business in question appears to have been relatively small. We do not have access to the café’s most recent set of accounts, we do not know how many employees the café employed and we do not know if the café had any plans for expansion. However, marginality would almost certainly have been a concern to the US Embassy, in the light of the relatively low purchase price. When preparing E-2 visa applications, it is imperative to ensure that the issue of marginality is addressed satisfactorily and persuasively, in order to maximize one’s prospects of success.

3.    Practical Points

It is, as a point of practical pertinence, never advisable that applicants take steps to relocate ahead of visa issuance. While we, as lawyers, can often determine whether a submission is strong, we cannot guarantee any outcome and in this rapidly changing immigration climate, where policy can change from one day to the next, it is unsafe for an applicant to subject him or herself to any potential for financial loss or practical inconvenience when unnecessary.

Conclusion

While statistically E-2 visa denials such as the one reported above are not uncommon, in reality there are a number of steps entrepreneurs and investors can take in order to ensure the best chances of successfully obtaining an E-2 Treaty Investor visa.

First and foremost it is imperative, when contemplating an E-2 visa application, to seek legal advice early in the process, prior to taking any action. In particular, advice should be sought on (a) whether the proposed investment is likely to be considered sufficiently “substantial” for the purpose of any subsequent E-2 visa application, having regard to the need for all individual items of expenditure to constitute “qualifying investments” for E-2 purposes and (b) whether there is any risk the proposed E-2 enterprise may be considered “marginal” and therefore ineligible for E-2 company registration.

With sound legal advice, a meticulously planned investment strategy and a well-drafted immigration business plan, it is possible for an investor to submit a persuasive E-2 visa application and obtain an E-2 Treaty Investor visa, whilst making economically efficient investment decisions and minimizing his personal exposure to risk.

Davies Legal Immigration

At Davies Legal Immigration, we have represented a range of individual investors and SMEs across a variety of sectors in connection with E-1 Treaty Trader and E-2 Treaty Investor visa applications. We offer a “one-stop shop” for all matters of US business immigration, comprising a standard entity formation service, immigration business plan drafting service and CPA verification of immigration business plan service. We provide a comprehensive service tailored to your unique needs and undertake to keep you informed. Call now for a complimentary assessment of eligibility with one of our licensed US immigration attorneys and take the first set towards setting up a business Stateside.

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Kaitlin Davies
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