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.
Saverin, 30, joins a growing number of people giving up U.S. citizenship ahead of a possible increase in tax rates for top earners. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dormitory and stand to reap billions of dollars after the world’s largest social network holds its IPO.
Besides helping cut tax bills stemming from the Facebook, the move may also help him avoid capital gains taxes on future investments since Singapore doesn’t have a capital gains tax.
Saverin’s estimated gain, and subsequent tax bill, would be based on an appraisal by his tax advisers. They could have valued his Facebook stake at less than it will be worth once shares trade publicly, reducing his liability. For tax purposes, Saverin could say that the value of his stake should be discounted because of the potential difficulty of selling the shares while the company remains private.
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.
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, head of the global tax practice at Baker & McKenzie in Hong Kong.