Facebook Co-Founder Eduardo Saverin is no longer a U.S. citizen, and that move may save him millions of dollars in taxes once the social network?s initial public offering takes place, slated for next Friday.
Bloomberg reported that Saverin?s name was included on the Internal Revenue Service?s list, published April 30, of people who decided to renounce their U.S. citizenships.
Tom Goodman, a spokesman for Saverin, told Bloomberg via email that the Harvard University classmate of Facebook Co-Founder and Chief Executive Officer Mark Zuckerberg made the decision to renounce his U.S. citizenship ?around September? 2011, adding:
Eduardo recently found it more practical to become a resident of Singapore, since he plans to live there for an indefinite period of time.
Saying that Saverin, who was born in Brazil, intends to invest in companies from that country and other global firms exploring entry into the Asian market, Goodman added in his email to Bloomberg:
Accordingly, it made the most sense for him to use Singapore as a home base.
Saverin reportedly owns about 4 percent of Facebook, and Bloomberg said his stake would be worth some $3.84 billion at the high end of the company?s current valuation, pointing out that Singapore does not have a capital-gains tax, although it does tax income earned within the country, and ?certain foreign-sourced income.?
Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan?s law school, told Bloomberg Saverin will not get off scot-free, as he will still have to pay an exit tax on capital gains from his stock holdings, adding that in cases of this sort, the IRS treats the stock as if it had been sold. Avi-Yonah told Bloomberg:
(Renouncing your citizenship well in advance of an IPO is) a very smart idea. Once it?s, public you can?t fool around with the value.
Bloomberg reported that a record 1,780 people surrendered their U.S. passports last year, compared with 235 in 2008, and Richard Weisman, an attorney at Baker & McKenzie in Hong Kong, told Bloomberg:
It?s a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice. The tax cost, complexity, and the traps for the unwary are among the considerations.
Readers: Do you think Saverin?s move to renounce his U.S. citizenship was drastic, fiscally brilliant, or both?
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