Among the Organization for Economic Cooperation and Development, only the United States mandates that U.S. citizens must pay taxes to the country regardless of their place of residence. This requirement applies not only to U.S. citizens but also to U.S. permanent residents holding green cards. So how should U.S. investment immigrants comply with the rules and pay taxes legally? The Tax Guide for U.S. Green Card Holders is here!
According to the regulations of FATCA, foreign financial institutions must provide the U.S. Internal Revenue Service with information about U.S. taxpayers, including their substantial ownership interests in foreign companies. According to the U.S. Congressional Joint Committee on Taxation, invoking this tax law for tax collection is estimated to generate an additional $8.7 billion in tax revenue for the government over the next ten years.
The Tax Guide for Green Card Holders stipulates that according to the relevant provisions of the "Tax Guide for Green Card Holders" published by the U.S. Internal Revenue Service, U.S. green card holders, whether residing in the United States or outside the United States, are obligated to report their worldwide income obtained in any manner as long as they are legal U.S. permanent residents.
The scope of global income includes personal salary income of investment immigrants, overseas bank accounts, investment income from equity or stocks, etc. To avoid the phenomenon of double taxation, the United States and China have signed the "Agreement on Avoiding Double Taxation and Preventing Tax Evasion."
According to the agreement, Chinese citizens holding green cards who have paid taxes in China at the Chinese tax rate only need to provide relevant tax payment proof to the United States to be exempt from corresponding tax obligations. However, due to the differences in tax systems between the United States and China, green card holders may face situations where they need to file taxes in both the United States and China, or even pay income taxes in both places simultaneously.
For example, if a person has an annual income of $200,000 in China and pays personal income tax to the Chinese government according to the Chinese tax rate, when reporting personal income to the U.S. Internal Revenue Service, they must first deduct the amount of income tax already paid in China. If their income is below the taxable amount in the United States, they do not need to pay personal income tax to the United States. However, if the individual's income still requires them to pay personal income tax according to U.S. tax laws and rates, they will need to pay the additional personal income tax to the U.S. Internal Revenue Service.
At the same time, there are various legal ways within the U.S. tax system to engage in reasonable tax avoidance and apply for tax refunds. Any family holding a green card can work with their family accountant to develop tax reporting, tax avoidance strategies, and apply for tax refunds that suit their family.