Eduardo Saverin, one of Facebook's co-founders, has renounced his American citizenship ahead of the company's groundbreaking IPO — a move that would drastically reduce his tax bill, Bloomberg Businessweek reported.
Saverin has a 4 percent stake in Facebook's IPO, which at an estimated valuation of $11.8 billion is the biggest public offering for an Internet company in history, according to Bloomberg. At the high end of the IPO's value, Saverin's share would be worth about $3.84 billion.
The co-founder of the social media giant was born in Brazil and currently resides in Singapore, which doesn't have a capital gains tax, although it does tax local as well as some foreign-source income, CNET reported. Renouncing his American citizenship, however, could shield Saverin from much, though not all, of his US tax liability related to his Facebook holdings.
“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Tom Goodman, a spokesman for Saverin, in an e-mailed statement to Bloomberg.
Though renouncing US citizenship is rare, it has become more common in recent years, CNN Money reported: 1,781 Americans did it in 2011, up 16 percent from 2010 and nearly eight times the number of 2008 expatriates, according to the US Treasury.
Some critics of America's tax policy suggest that Saverin's move may be indicative that the US's taxation should change.
"If people are leaving America because our tax law is onerous, that’s a signal we should reform the tax code," wrote Forbes' Daniel J. Mitchell. "Attacking those who expatriate is the fiscal version of blaming the victim."
Saverin sued Zuckerberg, his Harvard University classmate, over his ownership in Facebook, and settled for an undisclosed amount, according to the International Business Times. He has since invested in various Asian, European and American companies.
In a recent regulatory filing, Facebook announced that many of its employees will have to pay 45 percent in taxes once the stock becomes publicly traded, which may cut up to $1.1 million per employee, CNN Money reported.
The social network is expected to price its IPO on Thursday, at an estimated $28 to $35 per share range, according to CNN. Facebook's public trading is set to begin next Friday.