Facebook co-founder Eduardo Saverin renounced his U.S. citizenship ahead of the company's highly anticipated initial public offering, which could enrich him by several billion dollars. He currently lives in Singapore, a country that doesn't tax capital gains. But none of this has anything to do with avoiding U.S. taxes, Saverin told The New York Times this week.
"This had nothing to do with taxes. I was born in Brazil, I was an American citizen for about ten years. I thought of myself as a global citizen," he told the newspaper in an interview published Wednesday.
Saverin, who reportedly has between a two and four percent stake in the company he co-founded in April 2004 with Mark Zuckerberg and Dustin Moskovitz, could come into more than $3 billion if Facebook is valued in the neighborhood of $100 billion after its IPO this Friday on the NASDAQ exchange.
The Times notes that had Saverin remained a U.S. citizen and cashed in his Facebook shares after the IPO, his tax bill would have been in the neighborhood of $100 million or more.
Saverin, 30, isn't accused of any wrongdoing. But media accounts describing his expatriation, which was spotted in the in the Internal Revenue Service's most recent quarterly list of U.S. citizens who have given up their citizenship, have generally assumed that his decision was based on a desire to avoid the taxman.
That's led to a good deal of criticism of Saverin, perhaps some of it fueled by his contentious place in Facebook's history and reports of the lavish, playboy lifestyle he allegedly leads in Singapore, where he has lived since 2009.
But Saverin told the Times that he followed all the rules in filing to renounce his U.S. citizenship in January - and that his departure from his first adopted country didn't come without a price. "I'm not a tax expert," he said. "We complied with all the known laws. There was an exit tax."
Dodging the Inheritance Tax?
Tax lawyers consulted by the newspaper speculated that Saverin's real goal in leaving the country wasn't to do with the current 15 percent rate of taxation on capital gains, but rather may have been to avoid an even steeper inheritance tax down the line. Saverin could likely have lived tax free as a U.S. citizen for some time by borrowing against his Facebook stock instead of selling it, they said, but his heirs wouldn't be able to avoid shelling out 35 percent or more in estate tax after his death.
Saverin, a college classmate of Facebook CEO Zuckerberg, was the first investor in the company when it was created in a Harvard dorm room in early 2004. But Saverin's relationship with Zuckerberg and Facebook became strained within just a few short months.
As depicted in the film The Social Network, soon after Zuckerberg moved the fledgling company to Palo Alto, Calif. in June 2004, Saverin was squeezed out of Facebook, reportedly at the urging of early angel investor Peter Thiel, former Facebook president Sean Parker, and others.
A lawsuit Saverin filed against the company resulted in an undisclosed settlement, which appears to have included the restitution of at least a portion of his one-time 34 percent stake in the company and his recognition as a Facebook co-founder in the company's documentation.
Since taking up residence in Singapore, Saverin has reportedly been "a Kardashian-like figure" on the Southeast Asian city-state's nightlife scene, according to The Wall Street Journal. While his investments in Singaporean tech start-ups have been almost non-existent, the newspaper reported earlier this month, Saverin's contribution to the bottom line at local watering holes has become the stuff of legend.
Saverin is "regularly spotted lounging with models and wealthy friends at local night clubs, racking up tens of thousands of dollars in bar tabs by ordering bottles of Cristal Champagne and Belvedere vodka" and "lives in one of Singapore's priciest penthouse apartments," according to the Journal. The Facebook co-founder claims that this depiction, like the talk of his tax avoidance, is simply wrong.
"It's a misperception, especially the playboy," he told the Times. "I do have a Bentley. I do go out. I'd rather not go into personal details." Saverin said he plans to watch Facebook's IPO unfold later this month with a few select friends.