A US green card holder living in China unloaded his share of complaints about the baggage that came along with having a permanent resident card while residing abroad. Damon Chen, the founder of Testimonial.to and PDF.ai, took to his X profile on Tuesday, August 12 (IST), to express his bafflement over official rules associated with the identity document that is famously highly coveted to the extent that even its backlog surpasses millions of cases.

“I’m a green card holder living in China. If I make any money in China, I still need to pay US federal and state taxes,” he wrote on the Elon Musk-led SNS platform. “Does that make sense?”

In a follow-up tweet, he added, “Most EU countries don’t tax their Europeans on income made abroad.”

What we know about the green card holder: While Chen claims to be living in China at the moment, he is based in San Jose, California, as per his LinkedIn profile. Having gotten his master’s in Electrical Engineering from Penn State University in Pennsylvania, the “indie hacker,” as Medium identified him, worked as a senior software engineer at Cisco Systems for over 8 years.

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During the Covid-19 period, when lockdown forced everyone to stay at home, he launched a community called IndieLog (formerly Lonely Dev), where indie hackers like him could connect with each other.

Netizens react to green card holder’s complaint

While a user quipped, “Yes because green card is a subscription based service,” another asserted “freedom is not free.” Several others also insisted that he could just give up his green card if he was not up for the deal, to which Chen nodded, and replied, “Of course! The card will be automatically cancelled if I don’t return in 2 years.”

Someone suggested that he spent more than 6 months outside the United States and he’d lose it. Chen countered, and shared, “We have the re-entry permit (up to 2 years stay abroad).”

Another techie on the platform called it the “price you pay to have access to America,” adding, “Unfortunately it’s the only country powerful enough to have such tax laws.”

“That is the American system. You were granted permanent residency, and you are now on the hook for worldwide income like the rest of us,” self-proclaimed ‘American Propagandist’ Maxwell Meyer replied. “By far one of the most important policies underpinning American success. Being an American means having obligations…”

Tax liability of green card holders

The Internal Revenue Service directly addresses this question raised in the recently re-surfaced hot debate. The official IRS website lists the following as its first ‘General FAQ’: “I’m a US citizen living and working outside of the United States for many years. Do I still need to file a US tax return?”

Answering the query, the website affirms that if you’re a US citizen or a “resident alien” living outside America, your international income inevitably becomes subject to US income tax no matter where you live. Moreover, even if you’re paying income tax in a foreign country, as a green holder or US citizen, you must still file a US income tax return while residing and being employed in a different country.

One may drop out of the said tax liability by abandoning their green card holder status by filing Form I-407 with the USCIS. You may also choose to give up your US citizenship “under certain circumstances described in the expatriation tax provisions,” says the official website.

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Any foreign immigrant obtaining a green card is treated as a lawful permanent resident of the US, and is hence forth deemed a US tax resident. “Your worldwide income is subject to US income tax, regardless of where you reside,” according to the IRS.

What about India?

Centra Bank of India confirms that in order to help non-resident Indians (NRIs), the Indian government has struck up Double Taxation Avoidance Agreements (DTAAs) with over 94 countries, including the US. Such agreements prevent individuals from being taxed twice on the same income.

Florida-based tax attorney Rahul Ranadive once explained to the Economic Times that all US citizens and green card holder must “pay taxes on such foreign income unless a treaty or statutory exclusion or foreign tax credit applies to reduce their US tax liability to zero.”

Dispelling further confusion on the matter, New Jersey-based firm Wilkin & Guttenplan’s CPA and director Vinay Navani said that a US citizen or green card holder living in India must declare their global income in their US tax return and their India return. “The DTAA will only help in ensuring that a particular income is not taxed twice,” he added.

India-US Consulting Services’ Cecil Nazareth also affirmed that the treaty agreement in place between India and America ensures you get “tax credit in each country on the taxes paid in the other.”