A Facebook co-founder has renounced his U.S. citizenship, and some observers say the reason may have to do with the tax bite he’ll face after the social networking site goes public next week.
Eduardo Saverin, 30, stands to reap billions from Facebook’s May 18 stock offering, according to Bloomberg News. Although his original 34 percent stake in the company is now estimated at below 10 percent after a falling out with Facebook, he still owns a sizable chunk of the company.
Saverin, credited with helping Mark Zuckerberg start Facebook while the two were at Harvard University, ranks at No. 634 on Forbes’ list of billionaires, with an estimated net worth of $2 billion. Those billions will multiply after the company’s initial public offering, which prices Facebook’s new stock at between $28 and $35 each.
The IPO, however, will also leave Saverin and many instant millionaires among Facebook staffers owing millions to Uncle Sam and state governments.
Facebook is already estimating that its employees will owe the IRS at least $4 billion. The tax bite for Saverin, however, will be greatly eased now that he’s a citizen of Singapore.
Saverin became a U.S. citizen in 1998 after moving to the country six years earlier, but he renounced his citizenship last September. His name appears on a quarterly federal list of Americans who have renounced their citizenship, the latest group as of April 30. Bloomberg reported a record 1,780 Americans gave up their U.S. passports last year.
Saverin won’t entirely escape Uncle Sam’s reach, however. An international tax expert told Bloomberg that Americans who give up their citizenship still face what amounts to an exit tax on capital gains from their stock holdings. The IRS treats the stock as if it has been sold, even if the investor hasn’t unloaded it.