Business

Facebook co-founder rejects claims he renounced US citizenship to avoid taxes

Eduardo Saverin, the Facebook co-founder who gave up his US citizenship, has nothing against the US, just its complicated rules on citizens holding money overseas, a spokesman said.

Saverin, who now lives in Singapore, decided last year to renounce his US citizenship, a decision that was made public late last week. The move sparked an outcry among some tax experts who suspect he is aiming to save on taxes.

Although Saverin will have to pay a hefty exit tax for renouncing his citizenship, based on some calculation of his assets, Singapore is a relatively low-tax jurisdiction, particularly for foreign investors, and does not levy capital gains tax. Thus he could save in the longer term.

In a political environment that is rife with talk of raising taxes on the wealthy, Saverin’s case could become another flash point.

Saverin spokesman Tom Goodman said Sunday his renunciation was prompted not by tax considerations but by US rules that make it more difficult for US citizens to live and invest overseas.

“US citizens are severely restricted as to what they can invest in and where they can maintain accounts,” spokesman Tom Goodman said. “Many foreign funds and banks will not accept Americans. This was a financial rather than a tax motive.”

It is true many US expats complain that American rules are making life more difficult for them. Those include the US tax system’s global reach (many countries tax based on residency), foreign bank account reporting rules, and the Foreign Account Tax Compliance Act (FATCA) — which requires foreign financial institutions to start reporting to the IRS on US citizens’ accounts.

Expats say as a result of all the regulations, some foreign banks are dumping more US customers. Goodman also cited FATCA, among other rules, as a problem for Saverin.

Treasury Department officials say they do not see evidence of a systemic problem for Americans living abroad arising from FATCA. People as wealthy as Saverin tend to have an easier time untangling red tape than the average US retiree living abroad.

The spokesman said Saverin plans to continue to invest in tech companies around the world, including the US.

“His decision had nothing to do with dissatisfaction here, but with his strong desire to do business there,” Goodman said. He also plans a charitable foundation.

To read more, go to The Wall Street Journal.