The author is managing director of Dubai-based Rayad Group, which advises families and institutions on establishing and structuring operations internationally.

For generations, families across China, India, Vietnam, South Korea, Taiwan and the GCC have followed a familiar path: Parents build wealth at home, while their children pursue education, careers, property and immigration opportunities abroad, especially in the US.

Money moves across borders every day to pay for university tuition, accommodation, living expenses, home purchases and investment programs such as EB5. Most families regard these transfers as a natural extension of parental support. But a growing number of international families are now discovering that US reporting rules may view those transactions very differently.

At the centre of the issue is IRS Form 3520, a little known disclosure form that may apply when a US person receives more than $100,000 from foreign individuals during a tax year. The form is generally not about taxing gifts. It is about reporting them. Yet failure to comply can expose recipients to substantial penalties and years of unexpected scrutiny.

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The issue has become significant enough that the US National Taxpayer Advocate publicly criticised aspects of the IRS penalty administration process after hundreds of millions of dollars in Form 3520 related penalties were assessed and later abated, contributing to changes in IRS procedures.

Tax professionals report increasing numbers of international families discovering Form 3520 issues years after funds were transferred, often during tax reviews, banking compliance checks, immigration filings or wealth planning exercises.

The implications extend far beyond wealthy investors and family offices. This is one of the most overlooked compliance risks affecting internationally mobile families. Parents believe they are simply helping their children succeed. They are paying university fees, funding accommodation, assisting with a first home or supporting immigration opportunities.

What many do not realise is that these same transfers may create reporting obligations that neither the parent nor the child anticipated.

This issue is particularly relevant across the Gulf, where expatriate communities have spent decades building wealth and supporting children studying overseas.

Across the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman, millions of dollars are transferred annually for education, property purchases and investment purposes. Most of these transfers are entirely legitimate. The challenge is that many families are unaware of the reporting obligations that may accompany them.

The concern is emerging at a time when governments and financial institutions possess unprecedented visibility into international financial flows. Over the last decade, the Foreign Account Tax Compliance Act, known as FATCA, transformed the relationship between international banking and US tax enforcement.

Banks and financial institutions across Asia, the Middle East and other major financial centers now operate within an environment of significantly greater transparency. While FATCA does not specifically report parental gifts, it has dramatically increased the amount of information available regarding US linked financial relationships.

Immigration records, banking documentation, source of funds reports, account ownership information, property acquisitions, international wire transfers and tax filings increasingly create interconnected data trails that can be examined collectively during compliance reviews.

What once existed as isolated records in separate institutions is increasingly visible through a broader compliance ecosystem. As international information sharing expands, reporting inconsistencies that may have remained unnoticed years ago are becoming easier to identify.

Many families first encounter this reality through education. A student arrives in the US from Dubai, Abu Dhabi, Riyadh, Doha, Kuwait City, Mumbai, Shanghai, Seoul or Taipei. Annual tuition can exceed $80,000 while accommodation, healthcare, transportation and living expenses may push annual parental support well beyond six figures.

Consider the situation of Rashi Sharma, whose name has been changed. After completing the International Baccalaureate programme in Dubai, she was admitted to Harvard University in 2022. Her parents, successful expatriate professionals based in the Gulf, wanted her to focus entirely on education. They rented accommodation, arranged household assistance and transportation support and transferred approximately $20,000 per month to cover living and educational expenses.

From the family’s perspective, these transfers represented nothing more than parental support. The funds had been accumulated legally and were intended to remove distractions so their daughter could concentrate on academic achievement.

In 2023, while continuing her studies, Rashi accepted a position with a technology startup. Like many international students, she entered the US tax reporting system through employment related filings and taxpayer identification requirements. Although employment does not automatically create US tax residency, it often represents the point at which students obtain taxpayer identification numbers, begin filing tax returns and become exposed to broader compliance obligations that may later include reporting large gifts received from parents abroad.

Several years later, advisers reviewing her affairs identified potential foreign gift reporting issues associated with substantial parental support received from overseas. The family had never considered that the transfers might carry separate reporting obligations because they assumed the payments were simply private family assistance.

Tax professionals say situations broadly similar to this hypothetical example are becoming increasingly common among internationally mobile families. The issue is often not whether the underlying funds were legitimate, but whether the recipient understood and complied with reporting requirements that may apply once significant foreign gifts are received.

The same issue frequently arises in the US residential property market. Parents provide down payments, purchase apartments or assist with mortgage obligations in cities such as New York, Boston, Miami, Los Angeles and San Francisco. While these transactions may appear routine within a family, they can create reporting obligations that remain undiscovered for years.

The issue becomes even more significant within the EB5 immigrant investor program. For more than two decades, parental gifting has been one of the most common funding mechanisms used by EB5 applicants, particularly among families from China, India, Vietnam, South Korea and Taiwan.

Parents transfer wealth accumulated through businesses, real estate holdings and investment portfolios. Children become principal applicants. Immigration authorities review the lawful source of funds, while tax authorities may later examine whether the receipt of those funds triggered reporting obligations.

This reflects a broader shift in the global regulatory environment.

The world has changed. Immigration planning, international banking, tax compliance and family wealth management can no longer be viewed as separate disciplines. Governments, regulators and financial institutions operate in a far more connected environment than they did a decade ago. A transaction undertaken for education, property ownership or immigration purposes may ultimately be reviewed through multiple regulatory lenses.

For international students, H1B professionals, green card holders, EB5 investors and expatriate families across Asia and the Gulf, the warning is becoming increasingly difficult to ignore. What was once regarded as a private family transfer may now carry reporting obligations spanning multiple jurisdictions.

In an era shaped by FATCA, expanding global transparency standards and sophisticated financial surveillance, understanding those obligations before funds are transferred may prove far less costly than discovering them years later.

Rayad Kamal Ayub

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