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Facebook Co-Founder Saverin Renounces Citizenship

Cadie Thompson and Paul O'Donnell
Friday, 11 May 2012 | 2:54 PM ET
Eduardo Saverin, co-founder of Facebook
Source: Goodman Media
Eduardo Saverin, co-founder of Facebook

Facebook co-founder Eduardo Saverin renounced his U.S. citizenship months before the social network's expected initial public offering.

"This was done many, many months ago and has nothing to do with the IPO," Sabrina Strauss, a spokeswoman for Saverin, said in a statement.

Facebook's IPO is expected next Friday at a valuation of up to $96 billion.

International tax experts, however, say that Saverin will save a bundle by expatriating ahead of Facebook’s IPO next week. As a foreigner, Saverin will pay taxes to the United States next year only on the presumed value of his shares the day his American citizenship ended, not the presumed higher amount his Facebook holdings will be worth after the IPO.

The timing of his renunciation also has tax implications.

“If his name came out on the list at the end of first quarter, he likely expatriated in the final quarter of last year,” says Michael Pfeifer, a partner at Caplin and Drysdale in Washington, D.C.

With the Bush tax cuts expiring at the end of 2012, the capital-gains tax rate, now 15 percent, is expected to go up. “He probably didn’t want to take the chance of paying the higher rate.”

Kevin Packman, chair of the offshore compliance team at the law firm Holland & Knight in Miami, concurs. “I would be very surprised if this were not related to reducing his tax,” says Packman.

Another spokesman, Tom Goodman, denied suggestions that Saverin had renounced his citizenship for tax purposes.

"We have been working with him for a long time and that subject never came up," Goodman said in a statement to CNBC.

Saverin, 30, was born in Brazil, but moved to the U.S. in 1992 and gained his citizenship in 1998.

Saverin's name was on a list published April 30 by the Internal Revenue Service that documented citizens who chose to renounce their citizenship.

Goodman told CNBC that Saverin renounced his citizenship in September 2011.

"He still has very strong ties to Brazil and is extremely passionate about not only his homeland, but also the U.S.," Goodman said. "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."

Goodman said Saverin has invested in Asian, U.S. and European companies and plans to invest in companies "that have strong interests in entering the Asian markets."

The Cost of Higher Taxes
Nearly half of IPOs have priced below expectations this year, reports CNBC's Kayla Tausche. Ron Insana, CNBC contributor, also weighs in on Procter & Gamble and Facebook co-founder Eduardo Saverin's move to Singapore.

"Accordingly, it made the most sense for him to use Singapore as a home base,” Goodman said in the statement.

Some of Saverin's investments include ShopSavvy, a price comparison app, Jumio, a mobile payments start-up and Denso, a video streaming app.

Saverin had been ranked 224 on Forbes’ list of richest Americans. The magazine said he would be taken of the list since he was no longer an American.

Saverin, portrayed as Mark Zuckerberg's best friend in the movie "The Social Network," started Facebook with the CEO at Harvard in 2004.

In an October 2010 commentary for CBNC about the movie, Saverin wrote about entrepreneurship in the age of the Internet.

"Working towards a common goal of creating new companies should be an aspiration for everyone, no matter what their political stripes or leanings may be, or where they live," he wrote. "Entrepreneurship is not limited to just our borders."

CNBC Producer Ryan Ruggiero and editor Paul O'Donnell contributed to this report.

email: tech@cnbc.com

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