For most immigrants, the day they achieve U.S. citizenship is one of the most momentous in their lives. It's a long, arduous process to get there, involving years of residency, study of our nation's history, and the swearing an oath of allegiance. It's an honor that many would-be Americans have given up their lives for. But for 30-year-old Facebook co-founder Eduardo Saverin, U.S. citizenship has its price: Rather than pay his fair share of taxes on the upcoming Facebook IPO, Saverin has renounced his U.S. citizenship to save some money.
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.
More from Tecca: