This has been a growing trend for a number of years. Changes in the US tax code, US laws, and the way the US government interacts with foreign banks has made increasingly difficult for US citizens, particularly those with assets, to live outside the US even if they are perfectly happy to pay taxes. Not only are foreign banks no longer willing to deal with Americans living abroad but in some cases complying with the aggressive US laws are in conflict with the laws where the people actually live. Naturally this is very frustrating to people who live overseas or who are married to citizens of other countries.
The way the US deals with taxes for Americans living overseas is gross overreach any way you look at it and the increasing difficulty of being compliant with US laws applied to people living outside the country is driving this. No other industrialized country treats citizens living outside its borders in this way and this reflects negatively on the US.
You can't escape US taxation by giving up citizenship.
He will have to pay the exit tax instituted in the 2008 Heroes Earning Assistance and Relief Tax Act (HEART) on all unrealized gains he has worldwide because his net worth is likely greater than $2 million. I believe it is set at 30%.
As Facebook has announced the strike price, the value of the company and what his tax liability is, already has a very dollar value.
There used to be a ten year shadow for giving up US citizenship where you'd still have to pay US gain taxes for 10 years after you gave it up.
And the federal government has the incentive and the means to collect on someone who is a billionaire.
The article says he actually gave it up last September, so the numbers might have been fuzzier then. Regardless, he's protected from tax on any subsequent rise in stock price. You can't escape past or current tax, but you can "escape" future taxation.
On the ten-year tax shadow: How would that even work? If you were no longer a citizen, what claim would the US have on your money?
Some friends of mine are yelling "see? our tax code is pushing capital overseas!" My argument is, that with $4B at stake, even if we had a "reasonable" income tax, people like this would still seek out tax havens where the burden is even lower still.
So you agree with your friends that people act in their best interests, including changing citizenship, when it comes to taxes, you just disagree on the amount of money it would take?
Surely the number of people who would renounce their citizenship to save a small portion of their income is smaller than the number of people who would renounce their citizenship to save a large portion of their income.
The article also references new changes in US laws that require even foreign institutions holding funds from US citizens to meet very strict reporting requirements on those funds. In response, some institutions are simply refusing to take funds from US citizens rather than accept what they see as the onerous burden of complying with these reporting requirements.
To a multibillionaire, the value of retaining American citizenship could easily be hundreds of millions of dollars. Or it might be much lower in that. The degree of which citizens seek tax havens will be proportional to the level of taxation, not a black-and-white yes-or-no thing.
Saverin was born in Brazil and has been living in Singapore for a while. There are also probably psychological advantages to being out of Zuckerberg's shadow.
While taxes might have played a role, it's not obvious that this was the principal factor.
It's common for UK citizens to give up citizenship, prior to an exit in their business and move to Monte-Carlo or Gilbraltar for a few years to avoid capital gains tax.
If Facebook blows up on the IPO and the stock value increases 50% or 100% he could easily be saving $500m - $1b in taxes. It's a no-brainer...
It's more of a no-brainer when he isn't even American. He "became" an American citizen in record time - arrived in the US in 1992 and was a citizen by 1998.
The lack of social responsibility is what erks me the most about Saverin's decision. Saverin takes full advantage of the investments and sacrifices made by countless Americans and then when the country asks for him to uphold his obligation as a citizen, he leaves to save a few percentage points. This is a tactic for small thinkers.
I feel it's really unjust the way we treat our fellow citizens living abroad. I would hate to be taxed both by the US and the country I was living in. He's already paid very a very large amount of tax for the value he generated while living in the US. Why should he pay US tax for the value he generates while living in Singapore or elsewhere?
Presumably, he would be paying long-term capital gains this year, which is only 15%. Sure, it's 15% of a lot a money, but it's still only 15%. I guess a big part of the reason to give up citizenship is not the tax, but also the fact that he has strong roots outside the US to being with.
Immigrant who only sought US citizenship for financial gain, renounces US citizenship for financial gain. This is not terribly surprising.
There is a subset of Immigrants that move to the US, not because they believe in its ideals, but because it is financially advantageous for them to do so. Sometimes it works for the benefit of the US... as in this case. Other times... not so much.
On balance, I believe we generally gain more than we lose. Though I have no data to back up that assertion.
Immigrants believe in American ideals more than most Americans. Esp when most americans barely know anything about their own country. How many of us even know the bill of rights by heart?
Just because one guy is making a financial decision doesn't mean you blame a large group for some perceived lost of ideals.
Does patriotism have anything to do with citizenship? or is the question of acquiring citizenship becoming a function of your financial/carrer plan? (I can see that in a lot of comments here. It is an easy logic too.)
In other words is "patriotism" or "nation state" a medieval concept that will, over the next century, morph into the "market-value-ism" or "market-states"? (In the hypothetical "market-value-ism": You will be able to enter exit & participate in civic activities an any place based on the education/wealth that you have &/or the corporation you are aligned with.)
I believe he would still keep is green card, I'm not sure though.
Also, if you worth more than 250K you can get in the US, and get a permanent resident visa (green card).
The only 'benefits' [1] of being an US citizen is, the social security money when you retire, and the right to vote.
With that being said, I'm about to start the process to become a citizen. I think everyone should do it if they can, since, you don't know what's gonna happen when we have an immigration hating president.
[1] Not sure if social security would have any funds when I, and Eduardo, retire. And, I don't think voting counts in this country.
Brazilian law says that he should have lost his Brazilian citizenship for voluntarily acquiring the US citizenship (which also requires that you renounce all others).
But I guess with so much cash it won't be a problem.
US citizenship is a nasty trap from which it is extremely difficult to escape. The US is one of a very small number of countries which will happily tax its citizens on income earned overseas, thus causing them to pay double taxes on everything they earn.
This has seriously bad consequences for US competitiveness, in particular:
1. It discourages competent foreign citizens from seeking US citizenship (a greencard is so much better!)
2. It discourages US workers from spending some of their careers overseas, thus reinforcing US cultural insularity and giving competitive disadvantages. Go to any interntional company's office in Singapore, Shanghai, Kuala Lumpur and note that it's filled with Brits, Australians, New Zealanders with very few Americans; this is why.
A green card has similar problems, similar exit taxes and so on. Get a green card, move back to your home country, you still have that tax burden as long as you have that green card.
The USA is only one of two (other being Eritrea) countries that taxes non-resident citizens. On top of that Eritrea's expat tax is only a flat ~%2 and is a remote african dictatorship. The USA is the only country which exposes it's non-resident citizens to a full tax load and system.
>2. It discourages US workers from spending some of their careers overseas, thus reinforcing US cultural insularity and giving competitive disadvantages. Go to any interntional company's office in Singapore, Shanghai, Kuala Lumpur and note that it's filled with Brits, Australians, New Zealanders with very few Americans; this is why.
It's worth pointing out that Singapore and Malaysia are both British Commonwealth countries, which does make it much easier for the Brits, Aussies, and New Zealanders to move to and work at those locations. Shanghai was also one of the major trading ports(along with Hong Kong) for the British with China, so they also have a very long history with the British Empire.
While the US does indeed have tax treaties with many countries, it doesn't have treaties with everyone regarding social security.
I live in Israel, which does have an income tax treaty with the US. Still, for many types of employment and contracting scenarios, I must pay social security "twice"—once for each country. That's a hefty amount of double taxation.
Regardless, the cost of compliance is a real burden. I'm still filing my 2010 taxes. I have accountants on both sides. Figuring out how to correctly pay my taxes, how much to pay, and how to operate in order to minimize my tax profile is a gigantic pain in the ass.
You're wrong about double-taxation. Most countries have an agreement with US to avoid double-taxation, so in practice you pay the larger of the two - US tax or the tax in the country of residence.
Another thing to note is that if you give up your citizenship you only pay taxes for all gains up to that point, so you actually have a choice - stick the American passport and pay US taxes, or give it up and don't pay US taxes.
I don't like the system either, but it's not THAT bad. Certainly did not deter me from coming here :) and will not deter me if I want to go somewhere else.
Things like this? I'm a little confused. Are you referring to the US government taxing capital gains income that an extremely rich US citizen earned in the US? Or are you referring to the laws that allow the government to collect those taxes, even when the individual has tried to avoid paying by fleeing the country?
One key thing to note is that he's giving up citizenship before the IPO because he's going to be richer after the IPO and the US levies a tax on all your worldwide assets (not just your income) when you give up citizenship.
So if he ever wanted to move overseas to begin with (and avoid being taxed on the US while he lives overseas - a rather obnoxious system from all I hear), now's exactly the time to do it.
He's going to regret this down the road. Yes taxing on Worldwide income is absurd but not more absurd than giving up your right to live in the US. There will come a day, probably not too far in the future, where being young and rich on a tiny island isn't fun anymore and he's going to want to do something with his life. He's going to be quite sad when doing it in the United States is no longer an option.
this has got to be one of the most insular things I've seen on hn in a while. sure, the us is a wonderful place in which to "do something with your life"; in fact it's where I've currently chosen to do something with mine, so I'm certainly not bashing it. but the world is full of places in which billions of people are doing fascinating things with their lives; to say that someone who made the considered decision to give up citizenship is going to regret it because only by coming back here can he accomplish stuff is deeply myopic.
The catch here is: good luck getting back in. The US gov't takes notice of this stuff, and it's just good to be aware of the implications for if you ever want to come back to the US. Not saying it's wrong or right (by all means, the less tax the better), but it's important to be aware of the consequences.
[+] [-] jandrewrogers|14 years ago|reply
The way the US deals with taxes for Americans living overseas is gross overreach any way you look at it and the increasing difficulty of being compliant with US laws applied to people living outside the country is driving this. No other industrialized country treats citizens living outside its borders in this way and this reflects negatively on the US.
[+] [-] Aloisius|14 years ago|reply
He will have to pay the exit tax instituted in the 2008 Heroes Earning Assistance and Relief Tax Act (HEART) on all unrealized gains he has worldwide because his net worth is likely greater than $2 million. I believe it is set at 30%.
As Facebook has announced the strike price, the value of the company and what his tax liability is, already has a very dollar value.
There used to be a ten year shadow for giving up US citizenship where you'd still have to pay US gain taxes for 10 years after you gave it up.
And the federal government has the incentive and the means to collect on someone who is a billionaire.
[+] [-] blahedo|14 years ago|reply
On the ten-year tax shadow: How would that even work? If you were no longer a citizen, what claim would the US have on your money?
[+] [-] laconian|14 years ago|reply
[+] [-] DanielBMarkham|14 years ago|reply
[+] [-] gyardley|14 years ago|reply
[+] [-] waterlesscloud|14 years ago|reply
[+] [-] cynicalkane|14 years ago|reply
[+] [-] shasta|14 years ago|reply
[+] [-] leot|14 years ago|reply
While taxes might have played a role, it's not obvious that this was the principal factor.
[+] [-] scott_s|14 years ago|reply
[+] [-] Matt_Mickiewicz|14 years ago|reply
If Facebook blows up on the IPO and the stock value increases 50% or 100% he could easily be saving $500m - $1b in taxes. It's a no-brainer...
[+] [-] muyuu|14 years ago|reply
I'd say citizenship was given a tad too lightly.
[+] [-] lbrdn|14 years ago|reply
[+] [-] benmccann|14 years ago|reply
[+] [-] onedognight|14 years ago|reply
Quite so. Good riddance Mr. Saverin.
[+] [-] alain94040|14 years ago|reply
[+] [-] ashconnor|14 years ago|reply
Edit: Correction. His children would be eligible.
Also, Singapore doesn't allow dual-citizenship, so he'll have to give up his Brazilian citizenship (if he had it).
[+] [-] apendleton|14 years ago|reply
[+] [-] jemeshsu|14 years ago|reply
No he doesn't. First generation new citizens are exempted. His kids will need to.
[+] [-] bilbo0s|14 years ago|reply
There is a subset of Immigrants that move to the US, not because they believe in its ideals, but because it is financially advantageous for them to do so. Sometimes it works for the benefit of the US... as in this case. Other times... not so much.
On balance, I believe we generally gain more than we lose. Though I have no data to back up that assertion.
[+] [-] bwb|14 years ago|reply
Just because one guy is making a financial decision doesn't mean you blame a large group for some perceived lost of ideals.
[+] [-] mike626|14 years ago|reply
[+] [-] urbanturbanguy|14 years ago|reply
In other words is "patriotism" or "nation state" a medieval concept that will, over the next century, morph into the "market-value-ism" or "market-states"? (In the hypothetical "market-value-ism": You will be able to enter exit & participate in civic activities an any place based on the education/wealth that you have &/or the corporation you are aligned with.)
[+] [-] igorgue|14 years ago|reply
Also, if you worth more than 250K you can get in the US, and get a permanent resident visa (green card).
The only 'benefits' [1] of being an US citizen is, the social security money when you retire, and the right to vote.
With that being said, I'm about to start the process to become a citizen. I think everyone should do it if they can, since, you don't know what's gonna happen when we have an immigration hating president.
[1] Not sure if social security would have any funds when I, and Eduardo, retire. And, I don't think voting counts in this country.
[+] [-] blahedo|14 years ago|reply
[+] [-] forinti|14 years ago|reply
But I guess with so much cash it won't be a problem.
[+] [-] _delirium|14 years ago|reply
[+] [-] calloc|14 years ago|reply
[+] [-] planetguy|14 years ago|reply
This has seriously bad consequences for US competitiveness, in particular:
1. It discourages competent foreign citizens from seeking US citizenship (a greencard is so much better!)
2. It discourages US workers from spending some of their careers overseas, thus reinforcing US cultural insularity and giving competitive disadvantages. Go to any interntional company's office in Singapore, Shanghai, Kuala Lumpur and note that it's filled with Brits, Australians, New Zealanders with very few Americans; this is why.
3. And of course, things like this.
[+] [-] mahyarm|14 years ago|reply
The USA is only one of two (other being Eritrea) countries that taxes non-resident citizens. On top of that Eritrea's expat tax is only a flat ~%2 and is a remote african dictatorship. The USA is the only country which exposes it's non-resident citizens to a full tax load and system.
[+] [-] cube13|14 years ago|reply
It's worth pointing out that Singapore and Malaysia are both British Commonwealth countries, which does make it much easier for the Brits, Aussies, and New Zealanders to move to and work at those locations. Shanghai was also one of the major trading ports(along with Hong Kong) for the British with China, so they also have a very long history with the British Empire.
[+] [-] idan|14 years ago|reply
Social Security.
While the US does indeed have tax treaties with many countries, it doesn't have treaties with everyone regarding social security.
I live in Israel, which does have an income tax treaty with the US. Still, for many types of employment and contracting scenarios, I must pay social security "twice"—once for each country. That's a hefty amount of double taxation.
Regardless, the cost of compliance is a real burden. I'm still filing my 2010 taxes. I have accountants on both sides. Figuring out how to correctly pay my taxes, how much to pay, and how to operate in order to minimize my tax profile is a gigantic pain in the ass.
FYI.
[+] [-] DenisM|14 years ago|reply
Another thing to note is that if you give up your citizenship you only pay taxes for all gains up to that point, so you actually have a choice - stick the American passport and pay US taxes, or give it up and don't pay US taxes.
I don't like the system either, but it's not THAT bad. Certainly did not deter me from coming here :) and will not deter me if I want to go somewhere else.
[+] [-] timr|14 years ago|reply
Things like this? I'm a little confused. Are you referring to the US government taxing capital gains income that an extremely rich US citizen earned in the US? Or are you referring to the laws that allow the government to collect those taxes, even when the individual has tried to avoid paying by fleeing the country?
[+] [-] fennecfoxen|14 years ago|reply
So if he ever wanted to move overseas to begin with (and avoid being taxed on the US while he lives overseas - a rather obnoxious system from all I hear), now's exactly the time to do it.
[+] [-] wilfra|14 years ago|reply
[+] [-] waterlesscloud|14 years ago|reply
The man could easily maintain homes in wonderful places around the world and do whatever he wants with his life in any of them.
He's not going to regret this for even a minute.
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