Who, What, When, and Why: E-2 Israel

Posted on: August 24th, 2017
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Who, What, When, and Why: E-2 Israel

By: Jason Susser

What is the E-2 Treaty Investor Visa?
E-2 is a nonimmigrant visa classification available to investors who are citizens of countries that have a treaty of commerce and navigation with the United States. Under these bilateral treaties, the US and its trade partners negotiate reciprocal investor visa programs for nationals of the foreign country to make a substantial investment in a business and obtain a visa for the purpose of directing operations of his or her new investment.
E-2 is not a means of obtaining permanent residence (a Green Card) in the US. In many cases, foreign nationals come to the US in E-2 status and later obtain permanent residence through other means such as increasing their investment and job creation plan to satisfy the EB-5 Immigrant Investor Program or using non-investor categories such as EB-1 Extraordinary Ability or EB-1 Multinational Manager.
The E-2 program though lends itself to long-term business as there is no limit to the number of years in which a person may be in E-2 status. Countries negotiate reciprocity agreements which determine the length of time the visa itself will be issued, but in many cases foreign nationals are able to stay in their initial E-2 classification for as long as seven years by making calculated exits and re-entries, before having to reapply.

Who qualifies for E-2?
To obtain an E-2 visa to the United States, nationals of a treaty country must invest or be in the process of investing a substantial amount of capital in a bona fide enterprise in the US. The enterprise must be a real and operating business, as opposed to a paper organization or passive investment (i.e. it should be producing a service or commodity).
Unlike the EB-5 program and many programs around the world that give residency for a certain investment amount, the investment for E-2 must simply be substantial. To determine whether an investment is substantial, the US government uses a proportionality test to decide whether the investment amount is substantial in relation to the total cost of the enterprise. Therefore, the type of business in which a foreign national is investing will likely determine the amount of capital needed to satisfy the requirement. Many practitioners point to the figure $100,000 as the minimum investment amount; however, while larger investments may strengthen a case, satisfying the proportionality test for the particular business is the true test.
The foreign national investor must also ensure that his or her investment is at risk. This means that the investment is at risk of loss to the investor, but also has the potential to generate financial returns. Furthermore, the E-2 investor must actually develop and direct the investment enterprise, again making E-2 the wrong immigration option for those looking at passive investments.

Why do Israel and the US need E-2?
Israel is, of course, one of the most innovative start-up nations in the world, and a world leader in technology, medicine, cybersecurity, and other industries. Scaling those businesses internationally often involves doing business in the United States. The lack of visa categories available for entrepreneurs and investors in the US can make growth painful for Israeli companies looking to break into US markets. The E-2 visa allows investors to create US operations in an efficient way. While other visa categories such as L-1 (Intracompany Transferee Visas) can be used, they do not have all the benefits E-2 offers to investors and eventually to employees of an E-2 enterprise.

When will E-2 be available for Israel?
Here lies the million-dollar question. E-2 is available to nationals from dozens of countries ranging from the European Union to Pakistan. Many of these treaties leave immigration lawyers scratching their heads, but the most notable absence is the State of Israel – a friend, ally, and major trade partner of the Unites States.
In June 2012, President Obama signed legislation finally making Israel a treaty country for E-2 visa purposes. In the five years since then, experts have been predicting E-2 is right around every bend. However, structuring the reciprocal investor visa program has proven to be a challenge in the Knesset. Israel has created the B-5 visa for US investors as the counterpart to E-2, but the negotiations between the two countries have continuously hit road bumps on issues of reciprocity.
The US Department of State gave everyone hope by suggesting that the E-2 program would be available in October 2017. Yet the US was unsatisfied with the latest version of the B-5 visa program, and has returned the regulations to the Knesset with comments to be considered before the bilateral agreement can begin.
Israeli investors and entrepreneurs looking to US markets should become familiar with the options currently available, such as the previously mentioned L-1, the E-1 Treaty Trader visa, and the potential options to permanent residency. Israeli companies looking towards the US marketplace should know that the E-2 visa is going to become available. While the timeline has proven to be uncertain, the day will come where investors and entrepreneurs can more easily conduct business between the US and the Startup Nation.