The co-founder of Facebook, Eduardo Saverin, has decided to renounce his U.S. citizenship, a move that could potentially save Saverin millions of dollars should the stock value of Facebook increase when it goes public today. Two senators are trying to create legislation that would bar Saverin from every returning to the United States and that could tax him hard. The two senators, Chuck Schumer, from New York and Bob Casey, from Pennsylvania, have introduced the Ex-PATRIOT Act. The act stands for Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy. The legislation, if passed, would require those who “expatriates for a substantial tax purpose — as judged by the Internal Revenue Service” to face a 30 percent mandatory tax on any future capital gains. Anyone who is a former citizen would also be barred from the country.
“This is a great American success story gone horribly wrong,” Schumer said. “Eduardo Saverin wants to defriend the United States of America just to avoid paying taxes. We aren’t going to let him get away with it. Saverin has turned his back on the country that welcomed him and kept him safe, educated him and helped him become a billionaire.”
Saverin is a permanent resident of Singapore now and his lawyer said that he renounced his citizenship back in September. Saverin’s name has appeared on the Internal Revenue Service list.
“I’m not a tax expert,” Saverin said. “We complied with all the known laws. There was an exit tax.”
Saverin, by renouncing his citizenship, will be charged an exit tax on the capital gains from the stock holdings. This should cost Saverin close to $365 million. The amount could be deferred though until he sells the shares. Saverin should be able to save close to $67 million because he renounced his citizenship back in September, when the stock value was much less. Singapore does not tax capital gains, so Saverin will not be taxed on what he makes from Facebook stocks. The Facebook stock of Saverin is said to be worth 4 percent of the total, valued at $3 billion to $4 billion.
An immigration lawyer from Jackson Lewis, David Jones, said, “What might be more sensible, if the government can show that you’re trying to avoid taxes, is not making the renunciation effective. That would probably be a more useful tool — or not making it effective for tax purposes.”
Saverin issued a statement on Thursday: “My decision to expatriate was based solely on my interest in working and living in Singapore, where I have been since 2009. I am obligated to and will pay hundreds of millions of dollars in taxes to the United States government. I have paid and will continue to pay any taxes due on everything I earned while a U.S. citizen. It is unfortunate that my personal choice has led to a public debate, based not on the facts, but entirely on speculation and misinformation.”