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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7360
Experience:  15years with H & R Block. Divisional leader, Instructor
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Hi there, could you explain me in details how the substantial

Resolved Question:

Hi there, could you explain me in details how the substantial presence actually work for foreigners who are on E2 visas? We are EU nationals looking to start a business in the US with already a very successful business in the UK and in the Czech Republic. So before we decide on a business structure we want to incorporate in the US, it would be great to know whether we will have to declare our global income since day one we arrive to the US on E2 visas. Many thanks
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Robin D :

Hello and thank you for using Just Answer,
E1 and E2 visas are given to individuals from certain countries, who invest substantially in the United States. You will have to follow the rules for substantial presence in the US and if you meet the test then you will be a resident alien for US tax purposes (not immigration) and your worldwide income will be subject to US taxation.
In the first year this happens you could choose to be a dual resident which would mean that from the day you meet the test till the end of the year you report worldwide income on US 1040 return and from Jan 1 of that year to the day you meet the test you would file a 1040NR US return and only report the US source income.

Robin D :

Here is a chart to assist in how to count the days:


You must pass both the 31-day and 183-day tests.



  • 31 day test: Were you present in United States 31 days during current year?

  • 183 day test:


A. Current year days in United States x 1 =_____days


 

Robin D :

B. First preceding year days in United States x 1/3 =_____days

Robin D :

C. Second preceding year days in United States x 1/6 =_____days


D. Total Days in United States =_____days (add lines A, B, and C)

Robin D :

If line D equals or exceeds 183 days, you have passed the183-day test.

Robin D :

You would have to do this each year if you plan on coming and going form the US on your business dealings.

Customer:

OK, thanks but you mentioned that in the first year we could choose being dual residents..can we choose not to?

Robin D :

Yes

Customer:

great..the reason I ma asking is that we are Andorran citizens..meaning we live in a tax haven where we do not have to declare income whatsoever...so for the first two years it would be great if we could be taxed only on the US based income while maintaining our Andorran status..

Customer:

sorry not Andorran citizens..I meant residents...

Robin D :

To do that you would need to watch your days in the US

Customer:

ok, so if we are in the US for more than 183 days, we are US tax residents?

Robin D :

Yes but you also have to look back at the previous 2 years so the second year could be impacted by the first.

Customer:

in the first year,we are there for more than 183 days

Robin D :

You are US resident alien

Customer:

ok, I think I understand...

Customer:

ok

Customer:

wow that's great to know finally!

Robin D :

Your positive rating is always thanks enough.

Customer:

OK:) thanks for your help!

Robin D :

I really enjoyed working with you – please feel free to request me again when you come back to ask another question.

Customer:

ok great !:)

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7360
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 2 other Tax Specialists are ready to help you

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