Does one needs to pay tax (in US) on the profit made from investments abroad?

Suppose a US resident invets some money abroad in a market like say China. Does tax needs to be paid in US, on the profits made from such investmenst?

Whether a US resident is required to pay taxes to the US on his/her profits earned outside the US is a complex question which cannot be answered on the basis of the facts provided. Both previous answers are wrong!

The US has negotiated tax treaties with most countries in the world, and these tax treaties govern the tax treatment of this very question. In addition, US tax law gives a foreign tax credit in cases such as this. This means that, at most, the taxpayer would pay a total amount of tax equal only to the higher of the tax imposed by the two countries. This foreign tax credit means that the tax is not "on top of" the other tax. Since the US is often the "tax shelter" of the world, this is a most significant tax provision.

In order to determine the actual tax treatment, please re-post with additional facts, including the country in which the tax payer is a citizen (you state that the individual is a _resident_ of the US), how long the person has been a US resident, whether the person is also a resident of another country, the type of income (royalties, capital gains, etc.), the amount of such income, the amount and percentage of tax paid to the host country (e.g. China in your example), and the tax year(s) concerned.

If you would like accurate information, then please re-post with the requested facts. If you yourself have this tax issue, then consult experienced and expert tax attorneys. Please be aware that this question concerns international tax law. This is one of the most complex areas of all law -- and experts in international tax law charge the highest fees of any area of law.

Hope this helps.

Yes, US citizens are required to pay tax on income earned anywhere in the world. There are, however, many complications, such as reductions in the US tax for taxes paid in the foreign countries.

yes, but what you have to watch is how much you are being tax in (per your example) China and then make sure to claim that as an off set to your tax, but the over all answer is yes. the US gove will always want their share. sorry.