Facebook cofounder Saverin becoming Singapore citizen?

Facebook cofounder Eduardo Saverin
Facebook cofounder Eduardo Saverin

Facebook cofounder Eduardo Saverin has given up US citizenship. His name appears on the Federal  Register list of people who have  given up US citizenship, published by the IRS (Internal Revenue Service) on April 30. So has he become a Singapore citizen?

“Eduardo recently found it to be more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Saverin’s spokesman Tom Goodman, reported the Washington Post. Saverin made that move “around September” last year, according to his spokesman, reported Bloomberg.

But a Singapore permanent resident also needs a passport to travel abroad. So which country’s passport is Saverin carrying now that he is no longer a US citizen?

Is the Brazilian-born Saverin, who became a US citizen in 1998 after moving to the US in 1992, still a Brazilian citizen? The Wikipedia entry on Brazilian nationality law says: “Since 9 June 1994, acquisition of another country’s passport should not cause loss of citizenship.”

Bloomberg reported:

Eduardo Saverin, the billionaire co- founder of Facebook Inc, renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.

Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin’s stake is about 4 percent, according to the website whoownsfacebook.com. At the high end of the proposed IPO market capitalization, that would be worth about $3.84 billion. His holdings aren’t listed in Facebook’s regulatory filings.

The Wall Street journal, however, said that “his stake is about 2 per cent, according to a person familiar with the matter”.

Forbes said:

If Saverin kept his U.S. passport, he would be paying up to 40 per cent in income tax, next year.

In Singapore, where he has resided since late 2009, top earners are taxed 20 per cent on earnings. Saverin will also not be paying capital gains tax on his investment.

Couple this with the celebrity status he enjoys in Singapore. Saverin is frequently spotted out and about on Singapore’s social scene and drives a Bentley.

Yahoo reported:

The Brazilian-born Saverin became a U.S. citizen in 1998 after moving here in 1992. Saverin surrendered that citizenship last year, becoming a resident of Singapore, a nation that lacks a capital gains tax. The move could mean a massive tax savings considering that Saverin’s 4% stake in Facebook is valued in the range of $3-4 billion.

Saverin won’t escape scot-free — giving up his citizenship requires him to pay an “exit tax” on his shares of Facebook. Essentially, he’ll have to pay the capital gains tax for the increase of value Facebook experienced while he was a citizen. Still, because he’s giving up his citizenship before the record-setting Facebook IPO, the tax basis for those holdings can be reported much lower than had he waited until after.

The idea of giving up your citizenship to realize tax benefits is being hailed as a smart idea, at least from a financial perspective. It’s becoming increasingly common, too — 1,780 people gave up their citizenship last year, as compared to 235 in 2008. In fact, avoiding U.S. taxes has become a growth industry: PayPal co-founder (and early Facebook investor) Peter Thiel has invested in an experiment to create floating cities off the coast of California, just outside Uncle Sam’s reach.

Saverin cofounded Facebook in April 2004 with Mark Zuckerberg and Dustin Moskovitz, said PCMag.com, adding:

Saverin, the Brazilian-born college classmate of 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 contentious 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.

The Wall Street Journal reported earlier this month:

The Brazilian-born billionaire’s skirmishes with Mr. Zuckerberg over the future of Facebook were dramatized in the 2010 film “The Social Network,” which portrayed Mr. Saverin as a naive entrepreneur.

Mr. Saverin was squeezed out of Facebook early on, and found his stake in the Internet juggernaut diluted to less than 10% from 34%. Today, after more dilution and sales of some of his shares, his stake is about 2%, according to a person familiar with the matter.

But 2% can go a long way, given that Facebook filed documents Thursday to go public with a valuation of up to $96 billion. It can go especially far in Singapore, a financial center better known for banning the sale of chewing gum than for a thriving technology scene.

Since his arrival in 2009, the 30-year-old Mr. Saverin has attracted intense interest here. Singaporeans avidly track his nocturnal social habits. Many hoped he would fund local tech start-ups, but so far his local investments, which include a cosmetics firm, have been limited.

Mr. 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, according to people present on these occasions. He drives a Bentley, his friends say, wears expensive jackets and lives in one of Singapore’s priciest penthouse apartments.

In Singapore, Mr. Saverin is a Kardashian-like figure, with scores of fans hoping for a sighting. Local websites have set up forums with threads entitled “Where does one meet Eduardo Saverin in Singapore?” Bloggers and journalists have written long posts after spending mere seconds with the billionaire.

Asia Tatler says:

He has invested in several promising startups, including Qwiki, Jumio, and Anideo, a Singapore-based company he co-founded. Saverin holds an economics degree from Harvard University and served as president of the Harvard Investment Association.

The Anideo website says the company develops mobile utility applications.

Wikipedia notes:

As of 2010, Saverin has liquidated at least $250 million worth of Facebook stock to later-stage investors such as Digital Sky Technologies, as well as via secondary exchanges like SharesPost.