Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

[LazyBoy]

http://www.bloomberg.com/news/2012-0...efore-ipo.html

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.

[dcarrigg]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

http://www.bloomberg.com/news/2012-0...efore-ipo.html

This is just another loophole that needs to be closed. Especially when done this close to an IPO. I say let him leave. We don't need him. But send him the bill. And send the alphabet boys along if he don't pay up.

Since when did Uncle Sam become so frail?

[lektrode]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

This is just another loophole that needs to be closed. Especially when done this close to an IPO. I say let him leave. We don't need him.

But send him the bill. And send the alphabet boys along if he don't pay up.

Since when did Uncle Sam become so frail?

+1
yep - THAT is precisely the question
and i know this will be a 'delicate' issue, but methinks The US needs some sort of 'exit strategy' to address this loophole in particular

come to america, thru a little work (and i DO mean 'little' since just what did this dude do, anyway, thats worth that kinda money), a little ingenuity, a whole lotta luck, a truckloada luck!
and mostly LUCKY HE CAME TO AMERICA AND WAS ALLOWED THE OPPORTUNITY, and the awesomely good fortune to have one dumped into his lap - and NOW??

he's gonna take the billions - and run?

BULLSHIT!

uhh... oh yeah - good morning!
(nothing like being awakened by the fone and now i gotta get on a plane - again... sigh....)

[doom&gloom]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

I am unsure how far he will get to "run".

When giving up citizenship one must allocate and value ALL assets, and pay an imputed capital gains tax, even on those assets that have not been sold. thus, at the time of his renouncement/relinquishment, he had to value his FB stock. With all this "press" I am sure the IRS will look closely at the value assigned, and make appropriate adjustments accordingly to his tax bill due.

In other words, I do not believe he gets to "skate".

[shiny!]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

I am unsure how far he will get to "run".

When giving up citizenship one must allocate and value ALL assets, and pay an imputed capital gains tax, even on those assets that have not been sold. thus, at the time of his renouncement/relinquishment, he had to value his FB stock. With all this "press" I am sure the IRS will look closely at the value assigned, and make appropriate adjustments accordingly to his tax bill due.

In other words, I do not believe he gets to "skate".

But if he moves his money offshore, how, in fact, will the IRS collect?

[jk]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

he's from brazil. he lives in singapore. so he was a naturalized u.s. citizen for a while. why should he pay u.s. taxes on all future global income?

[doom&gloom]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

he's from brazil. he lives in singapore. so he was a naturalized u.s. citizen for a while. why should he pay u.s. taxes on all future global income?

that all is another debateable subject...

[lakedaemonian]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

My questions are:

Would Saverin have renounced his citizenship in a Facebook IPO back in 1998?

If not, why not?

And my final question is that IF Saverin represents an anecdotal indicator of changing sentiment towards the US(often represented by Silicon Valley) as an international beacon of entrepreneurship, then what do India's top IIT grads think about the US today and for the next 10 years?

As I understand it, the US(again often represented in Silicon Valley) is somewhat(if not entirely) unique in that it doesn't punish entrepreneurial failure or even multiple failures......in the US an entrepreneurial failure or two can be viewed as an apprenticeship of sorts......whereas in many/most other places entrepreneurial failure can have grave financial and social consequences.

Lots of places have tried to replicate or emulate the formula of Silicon Valley with varying degrees of success....maybe Singapore will be one of them.

I guess what worries me on this topic the most, besides whether this year's crop of IIT grads pursue a chance at being the next Vinod Khosla in the US or home in India, is whether or not my indicator using Saverin is off the mark.

Maybe instead of me thinking of Saverin as an indicator of reducing inbound traffic for those pursuing their version of the American Silicon Valley entrepreneurial dream , maybe it's an indicator of increasing outbound traffic of American's version of the post Soviet Oligarch dream.

Maybe instead of referencing Vinod Kholsa I should be referencing Roman Abramovich.....oligarchs that make a run for the border and go expat.

[doom&gloom]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

If these are what you ponder, you should try doing a little reading about FATCA -- that is the law that will encourage no one to want to come start or invest in the US anymore.

[LazyBoy]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

If these are what you ponder, you should try doing a little reading about FATCA -- that is the law that will encourage no one to want to come start or invest in the US anymore.

Fortunately or unfortunately, these things are rarely known before you get here. (Or they change after you do.)

A related topic came up at lunch recently. I mentioned some things I've read on how US expats are impacted. A German said that even Permanent Residents have an obligation to (report things or pay taxes, I forget) to the US for 10 years after they leave (go home). The Chinese and Indian permanent residents at the table were floored.

Edit: But I can't confirm the info above with a quick google search, so it may not be correct. Permanent Residents are supposed to be paying tax on worldwide income while they're here, though.

[doom&gloom]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

Those with a green card, permanent residency, or citizenship must file tax returns with the US for ten years after they give up citizenship. Worldwide income is taxed, but the US kindly gives you a break on foreign taxes paid. Thus if your US tax rate is 35%, and you paid 25% somewhere else, you own the US the difference. If you live aboroad and work you get a certain exemption every year (around $85k I think for single, almost double that for married), but CONgress has discussed eliminating that exemption. I believe that day will come.

And gawd help you if you were made a US citizen when you were a kid, with dual nationality anywhere else, and don;t file taxes for scores of years with the US because you have never been here and never intend to come here. The penalties and interest could sink you like a lead weight off a boat. If you think you will never be found, you are wrong, as there are so many information sharing agreements in the world with the US that eventually you will pop up on the radar. At that point you better be brasilian or have married one to avoid extradition of the US comes after you. Brasil will not extradite, but most countries will.

Finally, under FATCA, there are even MORE forms to file if you invest or do business abroad, with much duplication, plus there is a 30% backup with-holding on money transfers abroad unless your bank is satisfied you have been paying your taxes. Of course they hid all kinds of other things in that bill as well.

[dcarrigg]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

+1
yep - THAT is precisely the question
and i know this will be a 'delicate' issue, but methinks The US needs some sort of 'exit strategy' to address this loophole in particular

come to america, thru a little work (and i DO mean 'little' since just what did this dude do, anyway, thats worth that kinda money), a little ingenuity, a whole lotta luck, a truckloada luck!
and mostly LUCKY HE CAME TO AMERICA AND WAS ALLOWED THE OPPORTUNITY, and the awesomely good fortune to have one dumped into his lap - and NOW??

he's gonna take the billions - and run?

BULLSHIT!

uhh... oh yeah - good morning!
(nothing like being awakened by the fone and now i gotta get on a plane - again... sigh....)

From TechCrunch:

Charles Schumer and Bob Casey, the two U.S. Senators behind the Ex-PATRIOT act — a proposal to go after early Facebook backer Eduardo Saverin and others like him that have renounced U.S. citizenship and are getting out of paying capital gains tax on stock windfalls — have now revealed the details of their plan.

When the offices of the two senators first announced their intentions.It’s pretty big: any ex-pat with either a net worth of over $2 million, or an average income tax liability of at least $148,000 over the last five years, “will be presumed to have renounced their citizenship for tax avoidance purposes.” The ex-pat will have to demonstrate to the IRS that this is not the case if it is not. If there is a “legitimate reason” for that person living outside the U.S. no penalties will apply. But if the IRS finds that someone gave up their passport for tax purposes, they will impose a tax on that individual’s investment gains “no matter where he or she resides.”The rate of that capital gains tax will be 30 percent — the same that non-resident aliens currently pay on dividends and interest earnings.

The tax detailed this act, if approved, will backdate for 10 years after its approval.Saverin is expected to make at least $3.84 billion when Facebook goes public tomorrow and would have picked up a tax bill of $67 million on it. He has lived in Singapore since 2009, where there is no capital gains tax. In September 2011 he renounced his U.S. citizenship.“Mr. Saverin has decided to ‘defriend’ the United States of America just to avoid paying his taxes. We aren’t going to let him get away with it so easily,” Schumer said in a statement. “It’s infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire. This is a great American success story gone horribly wrong. We plan to put a stop to this tax avoidance scheme. There should be no financial gain from renouncing your country.”

The senators are being a bit cheesy with their wording here — defriending being Facebook parlance for ditching one of your contacts — but the point is clear: they feel that Saverin, and others like him, are turning their back on America when they avoid paying their big tax bills. (“Ex-PATRIOT” Act is an acronym for “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act.)


As long as an individual does not pay his or her taxes under the scheme, he/she will be barred from entering the U.S., forever. Currently people can still come to America, even after renouncing their citizenship. Legislators have been trying to pass a similar measure for years now, although the last act to try to do this — the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 — apparently was written with some loopholes that made it unenforceable. So much for DC power. Makes you wonder if this time they will manage to be more effective.

The senators note that in 2011, 1,780 people gave up their passports — a record number. And there is a sign that this trend is growing: in 2008 only 235 people gave up their passports.Currently, if people have been found to have given up their passports for tax reasons, they can still come back to the U.S. for up to 60 days every year, and thousands do.It’s ironic, and probably not a coincidence, that the rise in tax avoidance of this kind is happening just as the U.S. banking system is going through its own wringer and the public tide is turning against the concept of fat cats benefiting from over-bloated markets when average people are finding it hard to make ends meet. Schumer and Casey at least in part seem to be playing to that crowd in this move.Full summary of the act below:

Summary of the “Ex-PATRIOT” Act
“Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act
Sponsored by Senators Charles E. Schumer & Bob Casey

I. Current law (Section 877A of the Internal Revenue Code) already provides that any individual who either has:
(a) A net worth of $2 million or more; OR
(b) An average income tax liability of at least $148,000 over the last five years;
and who renounces their citizenship has to pay an exit tax based on the value all property and assets owned by that individual.
The Ex-PATRIOT Act provides that when an individual expatriates for a substantial tax purpose—as judged by the Internal Revenue Service—that individual will be subject to a 30% capital gains tax on future investment gains. Section 871 of the Internal Revenue Code already taxes non-resident aliens for dividends, interest and other items at the 30% rate. The Ex-PATRIOT Act adds capital gains to this mix of taxable earnings. The tax will apply to anyone who gave up his citizenship in the last ten years but only taxes capital gains earned in the USA following the date of enactment.

II. The Ex-PATRIOT Act also provides that if the IRS finds that avoidance of taxes was a substantial purpose of expatriation, the individual who renounced citizenship will be barred from any type of re-entry into the United States. This section requires the IRS commissioner to make a decision regarding tax-avoidance intent for every individual subject to Section 877A who renounces citizenship. It is retroactive and will encompass individuals who have renounced citizenship for the 10-year period prior to enactment of the statute.

[shiny!]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

Too bad they don't go after the banksters with the same alacrity.

[lakedaemonian]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

Too bad they don't go after the banksters with the same alacrity.

They get pardoned:

http://en.wikipedia.org/wiki/Marc_Rich

[ProdigyofZen]

Re: Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO

I am personal friends with Eduardo's older brother. He resides in the US and pays taxes

Although I have never met Eduardo I am quite surprised he was the one entrusted with going out and trying to raise money for Facebook when it first started since his brothers personality is extremely introverted.