Just a few days ago, we brought you news that Facebook co-founder Eduardo Saverin had renounced his U.S. citizenship and plans to stay in Singapore. Saverin, who is expected to be worth around $3 billion after Facebook goes public with its Earth-shattering IPO, has been criticized by some who see his decision as simply a means to avoid U.S. capital gains tax. Saverin says that’s not the case, but it could mean that he’d be unable to ever return to these United States.
At issue is a little piece of U.S. immigration law brought to light by Talking Points Memo called Sec. 212. [8 U.S.C. 1182]. According to the law, visas can be denied to persons who have renounced their citizenship in order to avoid taxation:
Former citizens who renounced citizenship to avoid taxation.-Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is excludable.
For his part, Saverin denies being a tax dodger. Born in Brazil, Saverin moved to the U.S. as a child to avoid the threat of kidnapping in that country. He held U.S. citizenship for around ten years, but told the New York Times in an interview that he considers himself as a “global citizen.” He points out that he has, in fact, already paid a hefty 15% exit tax in the process of renouncing his U.S. citizenship, a process which began in January 2011 — well in advance of the Facebook IPO. From the NYTimes:
“I’m not a tax expert,” he [Saverin] said. “We complied with all the known laws. There was an exit tax.” That tax is based on the assets held by a citizen leaving America. The exit tax was intended to make sure the departing wealthy paid something before they decamped.
The NYTimes and other sources have pointed out that many wealthy Americans can avoid paying capital gains by borrowing against shares of stock instead of simply selling them. Were Saverin to sell his Facebook stock and cash out in the U.S., Bloomberg calculates his tax bill would be around $67 million. A paltry sum compared to the $3 billion he stands to make.
However, if Saverin were to die in Singapore as a wealthy man, his beneficiaries would avoid paying the 35% U.S. estate tax. Food for thought.
Whether or not Saverin can obtain a visa in the future is up to the U.S. Attorney General, as well as what kind of relationship the soon-to-be billionaire has with the federal government at the time. But really, it doesn’t matter what Saverin’s motivations are; tax dodger, global citizen, playboy, what have you. In the end, he’s still going to make a lot of money.
(TPM, NYTimes, ZDNet, via Techmeme)
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