Facebook co-founder gives up US citizenship
The decision by Eduardo Saverin before the IPO is seen as a move to limit his tax liabilities.
By Danielle Kucera, Sanat Vallikappen and Christine Harper
Eduardo Saverin, the billionaire co- founder of Facebook, renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.
Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin's stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. His holdings aren't listed in Facebook's regulatory filings. Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world's largest social network holds its IPO.
"Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time," said Tom Goodman, a spokesman for Saverin, in an e-mailed statement.
Saverin's name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service. Saverin renounced his U.S. citizenship "around September" of last year, according to his spokesman.
Singapore doesn't have a capital gains tax. It does tax income earned in that nation, as well as "certain foreign-sourced income," according to a government website on tax policies there.
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Saverin won't escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don't sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan's law school. For tax purposes, the IRS treats the stock as if it has been sold.
Renouncing your citizenship well in advance of an IPO is "a very smart idea," from a tax standpoint, said Avi-Yonah. "Once it's public you can't fool around with the value."
Saverin previously scuffled with Zuckerberg, his Harvard University classmate, over his ownership in Facebook. Saverin sued him and settled for an undisclosed amount.
The 2010 movie "The Social Network" added to Saverin's fame after it portrayed him as a scorned friend who provided the company's early financing and then was squeezed out. In the film, written by Aaron Sorkin, Saverin was portrayed by Andrew Garfield, who will play Spider-Man in "The Amazing Spider- Man."
Saverin moved to the U.S. in 1992, and became a citizen in 1998, his spokesman said. He has invested in Asian, U.S. and European companies, according to his spokesman.
He plans to invest in Brazilian and in other global companies that have strong interests in entering the Asian markets. "Accordingly, it made the most sense for him to use Singapore as a home base," Goodman said in the statement.
His U.S. holdings include Jumio Inc., an online payments company, and ShopSavvy Inc., a price-comparison service.
Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.
Income-tax rates for top U.S. earners will rise to 39.6 percent from 35 percent next year, and rates on capital gains and dividends also are scheduled to rise unless Congress blocks the increases.
"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," said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. "The tax cost, complexity and the traps for the unwary are among the considerations."
Some of the world's largest wealth-management firms have ramped up efforts to fight tax evasion ahead of Washington's implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc, Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. all say they have turned away business.
The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. That means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which may depress banks' returns.
Facebook plans to price its IPO on May 17, offering 337.4 million shares at $28 to $35 each. The shares will be listed on the Nasdaq Stock Market under the symbol FB. Morgan Stanley (MS), JPMorgan Chase (JPM) and Goldman Sachs (GS) are leading the sale.
To contact the reporters on this story: Danielle Kucera in San Francisco at firstname.lastname@example.org Sanat Vallikappen in Singapore at email@example.com Christine Harper in New York at firstname.lastname@example.org
To contact the editors responsible for this story: Tom Giles at email@example.com
This is the most important part of the story:
"A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.
Income-tax rates for top U.S. earners will rise to 39.6 percent from 35 percent next year, and rates on capital gains and dividends also are scheduled to rise unless Congress blocks the increases."
If Obama (who is also part of the 1%, but needs the vote of the foolish part of the 99% to keep his free White House mansion, planes, golf rounds and vacations around the globe) keeps raising the corporate tax, more companies will go elsewhere to do business, since every business is created to make a profit, and without businesses here, there will be no new jobs, and the ninety-nine-percenters will stay jobless.
Hope some people will see this side of the story: Obama is making business go and taking US jobs away with them. This was the promised change.
If this makes you angry, then stop using facebook.
Not going to stop using facebook, even though this makes you angry?
You are then contributing to what makes you angry.
It's very simple really.
As far as the tax code goes, we need to change. In 2010 the U.S. tax code was 71684 pages in length.
The tax code should be able to be printed on a 5x10 card.
15% on income for EVERYBODY!!
No credits. No loopholes. just a straight 15%.
When things are fair and easy people stop trying to keep from paying up.
That would increase revenue.
I can see how it is easy to blame the right for attacking education and science. In truth the right attacks the educational system that allows sub-standard teachers to continue educating our children. Why? Because of the union mentality. This idiotic need to recognize tenure is in effect rotting our education to the core. It's entitlement in the clearest sense. If the individual in any other job performed as poorly as this country's educators, we all would be fired. Why can't we work on a system that rewards results, incents the producers to excel? We cannot afford to allow bad teachers to hide behind their union contracts!
Why are you crying about this Guy.
Charlie Rangel Cheated and didn't pay taxes on his Rental Property and what did he get.
Nancy Pelosi fought for a Raise in the Minimum Wage and What did her and her Husband get.
They moved their TUNA CANNING COMPANY to another ISLAND SO they can still pay $1.50 Hr
What happened to them, NOTHING.
I laugh at Liberals ,They Yell and Scream about Bush, Cheney, and Romney, BUT you never hear a word when their own do something.
Have a GAY OL TIME.
Oh By the way, I read that a Women Hated America, Gave up her Citizenship, Was a Atheist, War Protester, Married an African , and What happened to her , She had a SON and he became President.
Facebook is a colossal waste of time. They should move the whole operation to Singapore and be subjected to daily caning for foisting this monstrosity on the world. Twitter is another colossal waste of time as well. They are anti-social network tools that enable people to avoid face to face contact. Get rid of all stinking smell phones as well. Useless.
Well, did it ever occur to you that Congress made the laws that were passed to encourage the Rich Fat Guys to move their holdings off shore to protect them from taxes. Congress could change the laws to bring them back but they are in the pockets of the big corporations and everything is just fine for them. Until we get a working congress and senate in office, we will always have this problem. We need elected officials that will listen to the people and not the big corporations. You have to watch the chicken coop to keep the fox out!!!!
For those of you that are bad mouthing this guy I have a couple of questions. Have you ever used a deduction when filling income tax? If so you have done the same thing this guy is doing. You have limited the tax you owe by using a legal tax reduction. The next question is why do any of you think you have a right to this guys money? He earned it. It is not the governments money, (the government has no money), and it is not your money. The idea that someone with more then you should pay more then you only makes sense to those on the receiving end and a few ultra rich who live in fantasy land.
Our country is broke. The current tax levels don't provide enough money to pay the interest due on our debts. None of the last 4 administrations have done anything to solve this problem. They have all added to the problem by spending more then they take in. The largest portion of our governemts spending goes to social programs. There needs to be severe cuts in government spending to balance our budget but if we don't then the gravy train will grind to a stop and the last great depression will seem like the good old days.
I personally would not give up my citizenship. I think the United States is the best nation on the planet. I also think that rational, conservative thinking will one day again hold sway and the entitlest mentality will be seen as a low spot in history.
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