For the first time, citizens of Israel and the United States will be able to invest in businesses and receive work visas.
By: Liran Jacob Rosenfeld and Liat Portal
The Israeli Knesset (Congress) Interior Committee approved the E-2 work permit for Israelis interested in investing in the United States last Monday. For the first time, a mutual agreement was approved between the US and Israel, whereby Israeli and US citizens could invest in businesses and receive a work permit based solely on investment. Israeli investors will be required to present available capital and employment guarantees to American citizens. On the other hand, American investors in Israeli companies will be able to employ an American worker without issuing an expert visa, in an abbreviated procedure and without time limitation.
To this day, Israelis who wanted to start a business or acquire existing business activity and receive a suitable work visa were forced to meet the strictest threshold conditions, which included presenting real trade between the two countries, seniority, exceptional achievements or proof of unique knowledge. Now, in order to get the visa, the entrepreneurs must present must own at least 50% of the company and ensure the creation of new jobs for American citizens.
This E-2 agreement began to take shape during the Obama administration, and the Israeli government approved the regulations in January 2017. Since a work visa for the American citizens in parallel didn't exist in Israel, a long list of amendments and approval was required in the Knesset Internal Affairs Committee. Israelis will be able to begin applying for this visa in the coming months after US authorities finalize the Israeli regulations approved this week.
This is a significant breakthrough because, for the first time, this agreement opens a window that allows private investors and companies to invest in any business that will create new jobs for American citizens. In this group, you can find marketing companies, dimond companies, restaurateurs and VCs as representative examples. For the Israeli startups, this is a major opportunity for businesses that were not possible before. As part of this visa, the founders of Israeli startups and their families will be able to obtain a work permit for a period of one to five years and develop the business in the American market. It is important to emphasize that the available capital to be presented for the investment is variable and depends on the type of business and its business activity.
With E-2 visa, entrepreneurship is not only for startup founders
Investing in businesses in the US allows investment in traditional businesses alongside businesses that exhibit innovation. The guiding principle of obtaining approval is investing in a business that strives to develop and grow. For the E-2 visa, opening a restaurant, cafe, marketing company, spa, beauty salon, construction / renovation company, carpentry, or start-up company are businesses included in this category. Entrepreneurs should present a live, working, and managed business with clear growth objectives that are clearly presented in a business plan.
Passive investment is not considered an investment that complies with the E-2 visa regulations. In other words, investment in income producing real estate does not meet the threshold requirements because no jobs are created for the American public and the entrepreneur does not manage a company or employees.
How much do you need to invest to get E-2?
According to Liat Portal, CEO of Shop Immigration Israel, the budget needed to start a business varies according to industry and field of activity. The range is wide, so it is important not to rely on rumors of numbers that you have heard with half an ear and understand that each case should be examined on its merits. The available capital that must be presented should cover the setup costs, the operation in the first year and the entrepreneur's wages. Opening a marketing company for example will require lower setup costs than opening a restaurant. Entrepreneurs should take into account that the visa is granted for a period of between one to five years and when it needs to be renewed it is necessary to present growing business that recruited employees. When the business present as supporting the founder and his family only, without creating new jobs, it will not be approved by the authorities and may revoke the renewal of the visa when it expires. Since the entry of Donald Trump to the White House, the examination of applications has become much more stringent and L-1 and E-2 visas with minimal thresholds for creating new jobs are not approved by the authorities if American workers are not recruited.
How Does It Work?
The first step is to open a company in the local authorities or to purchase an existing business activity. When existing business is acquired, the founder must own at least 50% of it. The next steps are hiring a CPA, a workspace, suppliers and writing a business plan that supports the initial amount of money to be presented. The required capital must be transferred from the founders' bank account to a private bank account in the US and only then transfer it to the business account. The authorities examine the source of the funds and it requires a presentation of the sources of capital up to the level of the cent.
The transfer of capital and its presentation is not sufficient, it is necessary to present expenses as part of the current business activity. A common mistake of entrepreneurs who received this visa is the payment of business expenses from the private account rather than the business account, which leads to questioning the business activity by the authorities that review the visa petition and may lead to the denial of renewal of the visa.
How long does it take?
Receiving an E-2 visa is relatively fast and takes about a month on average. The process of building the petition case takes on average about three months and depends mainly on the client, since it includes collecting documents, translating them and presenting them to the authorities for approval. After submitting the case, the entrepreneur will be asked to attend an interview at the American embassy where the final approval for the visa will be received.
There are no shortcuts
The best way to do the E-2 process is to do it right. Open a real business, invest money in the business and make the business create new jobs. For the government, the most important thing is to see that the source of funds is clear and that it is not money laundering. Entrepreneurs who wish to obtain a work visa by investing in a business or acquiring an existing business activity should provide proof of the source of available investment capital, transfer it to a business account in the US, and present detailed expenses so that the authorities have no doubts. The additional significant factor is the creation of jobs and when no funding is made at all, this is a significant obstacle to the approval of the visa. The clearer the request, the easier it is for the authorities to examine and approve it.