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.
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.
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?
In fact the number is even smaller than the raw number of renunciations. A spot-check at the list of renunciations suggests that most are actually people who in practice ceased to be Americans long ago, or in some cases never were. Some were born overseas to American parents and have never lived in the US; one actor on the list is of Italian origin and moved back to Italy 40 years ago; etc. Apart from a tiny handful of cases, it seems more like formalizing situations that already exist (people who aren't really Americans just making it formal). A number are also people applying for citizenships in countries that don't recognize dual citizenship, who are required to renounce their American citizenship to do so.
To someone with a couple million dollars, having that U.S. flag on their passport does afford a great deal of freedom and security. But, with several billion, you can pretty much buy all the freedom and security you can get.
While taxes might have played a role, it's not obvious that this was the principal factor.
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...
I'd say citizenship was given a tad too lightly.
Edit: dumb math error.
Quite so. Good riddance Mr. Saverin.
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).
http://en.wikipedia.org/wiki/Military_service#Brazil
"While de jure all males are required to serve, numerous exceptions mean military service is de facto limited mostly to volunteers, with an average of between 5 and 10% of those reporting for duty actually being inducted"
No he doesn't. First generation new citizens are exempted. His kids will need to.
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.
Just because one guy is making a financial decision doesn't mean you blame a large group for some perceived lost of ideals.
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.)
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.
But I guess with so much cash it won't be a problem.
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.
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.
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.
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.
As for as the "double" part, can you not then collect from both countries when you retire?
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?
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.
Also, US citizenship is not a "trap" in Eduardo's case. It was his choice to become an American citizen in the first place.
Point #1 seems to be belied by simple observation. My US-based career has been filled with international professionals, virtually all of whom planned on spending their careers here, and almost all of whom have/had or were planning to get US citizenship.
I guess #2 makes sense, though honestly the biggest barrier to US professionals leaving for career opportunities elsewhere is the fact that (almost without exception) the same jobs pay much better here.
I don't buy #1 either, since most people don't get citizenship in a country unless they plan on settling there.
http://www.irs.gov/businesses/small/international/article/0,...
It's not cool on principle, I suppose, but most people find it hard to sympathize with the problems you face when you make more than $150k/year.
Hong Kong, Singapore, Switzerland. Get yourself a permanent residency in at least one of those three.
Americans are exempt from the double-tax up to $91,400. Since I imagine most expat workers are earning under this level, I don't imagine that taxation is what's keeping Americans at home. Personally, I've found it difficult to even be considered for work abroad, usually due to visa issues. Other countries seem to have reciprocal working holiday visas for young people, and I imagine that this allows people to develop the specialized skills that justify the visa sponsorship or permanent resident status necessary to continue working abroad.
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.
Sure there are plenty of other great places to live than the United States - but his career trajectory seems to be in tech. Thats where he is continuing to invest and put his time. All roads in that arena lead to California - a place he just voluntarily gave up the right to ever reside, work and do business in.
I was an expat for close to 7 years, have friends who renounced and thought long and hard about doing so myself. I can say with great conviction that long term, in my educated opinion, it isn't worth it.
