Thursday, 17 May 2012

Taxes^ Taxes^ Taxes^

Why is Facebook co-founder now in Singapore?

Facebook co-founder Eduardo Saverin now lives in Singapore.
Facebook co-founder Eduardo Saverin now lives in Singapore.

Singapore (CNN) -- With all the attention on the Facebook IPO, people have been wondering "Where in the world is Eduardo Saverin?"

The co-founder of Facebook, whose falling out with CEO Mark Zuckerberg was immortalized in the film "The Social Network," moved from the U.S. to Singapore in 2009. It was also recently revealed that Saverin, who was born in Brazil, gave up his U.S. citizenship a few months ago and became a permanent Singapore resident.

Why Singapore? According to his spokesman, Saverin's move was just "practical" as he plans to invest in companies "that have strong interests in entering the Asian markets. Accordingly, it made the most sense for him to use Singapore as a home base."

One other glaring possibility? Singapore has no capital gains tax. So depending on the size of his actual stake in Facebook, Saverin stands to realize substantial tax savings on any stock sales.

According to Singapore- based "Wealth-X" which gathers information on "ultra high net worth individuals," Saverin's estimated tax savings are "at least $39 million as a result of renouncing U.S. citizenship."

Saverin's spokesman denies the move was done for tax reasons.

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Facebook Co-Founder: America is OK. It’s the Rules That Are a Pain

Eduardo Saverin, the Facebook co-founder who gave up his U.S. citizenship, has nothing against the U.S., just its complicated rules on U.S. citizens holding money overseas, a spokesman said.

Mr. Saverin, who now lives in Singapore, decided last year to renounce his U.S. citizenship, a decision that was made public a few days ago. The move sparked an outcry among some tax experts who suspect he’s aiming to save on taxes. Although Mr. Saverin will have to pay a hefty exit tax for renouncing his citizenship, based on some calculation of his assets, Singapore is a relatively low-tax jurisdiction, particularly for foreign investors, and does not levy capital gains tax. Thus he could save in the longer term.

In a political environment that’s rife with talk of raising taxes on the wealthy, Mr. Saverin’s case could become another flash point.

Saverin spokesman Tom Goodman said Sunday his renunciation was prompted not by tax considerations but by U.S. rules that make it more difficult for U.S. citizens to live and invest overseas.

“U.S. citizens are severely restricted as to what they can invest in and where they can maintain accounts,” said spokesman Tom Goodman. “Many foreign funds and banks won’t accept Americans. This was a financial rather than a tax motive.” 

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How Facebook's Elite Skirt Estate Tax

Tax specialists are paying attention to something else: how half a dozen of the firm's luminaries, including founder Mark Zuckerberg, appear to be using a perfectly legal maneuver called a grantor-retained annuity trust, or GRAT, to avoid at least $200 million of estate and gift taxes on their own Facebook shares.

"I'm not surprised the Facebook insiders have chosen to use GRATs," says John Bergner, a gift-and-estate tax expert at the Winstead law firm in Dallas. He calls the strategy "an excellent way to shift wealth to others at little or no tax cost and with minimal legal and economic risk."

Facebook's prospectus cites eight separate "annuity trusts" set up by insiders Dustin Moskovitz, Sean Parker, Sheryl Sandberg, Reid Hoffman, Michelle Yee (Mr. Hoffman's wife) and Mr. Zuckerberg over the past four years. All told, these trusts hold about 22 million shares that will be worth more than $690 million if Facebook goes public at $31.50 a share, the middle of its projected range.

Spokesmen or representatives for the six shareholders declined to comment on these trusts, or were unavailable. But Mr. Bergner and others—including Howard Zaritsky, a lawyer and estate expert in Rapidan, Va.—say they feel safe assuming the "annuity trusts" are GRATs, based on their knowledge of the territory and the language in Facebook's prospectus.

According to Saunders, they appear to be using a perfectly legal maneuver called a grantor-retained annuity trust, or GRAT, to avoid at least $200 million of estate and gift taxes on their own share. 

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Taxes Got You Down? Renounce!

U.S. taxes are a such drag that prodigiously wealthy people are renouncing their citizenship to escape Uncle Sam’s grasp. From Bloomberg:
Eduardo Saverin, the billionaire co- founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.
Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for anInternet company. Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. His holdings aren’t listed in Facebook’s regulatory filings.
Mr. Saverin’s spokesman said the 30-year-old “found it more practical” to be a resident of Singapore. He won’t escape without a scratch, however. Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan’s law school, told Bloomberg that Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don’t sell the shares.

Save your indignance. Mr. Saverin isn’t the only one who’s wise to the taxman. The WSJ’s Laura Saunders reported earlier today that half a dozen of Facebook’s top dogs, including founder Mark Zuckerberg, are getting good breaks without surrendering their passports.

Countries With the Highest Income Tax Rates 

Rising public debt and elections in Europe and the U.S. have once again raised the debate over taxes

Europe’s debt crisis is forcing some countries to raise taxes. Spain, for example, raised its personal tax rate by 2 percentage points to 45 percent last year and France’s newly elected Socialist Party is also proposing hiking taxes on the rich.

In the U.S., President Barack Obama has proposed the Buffett rule, aimed at ensuring households that earn more than $1 million a year pay more in taxes proportionally than middle-class families. Republicans have opposed the tax, calling it a “gimmick” and arguing it will hurt growth.

But there are many countries with top tax rates higher than the U.S.'s 35 percent. In fact, the U.S. is ranked 23rd in terms of the top marginal tax rate among 96 countries surveyed by KPMG in 2011

So which 10 countries have the highest rates, according to the accounting firm? Click ahead to find out. 

10. Ireland
Highest income tax rate: 48%
Average 2010 income: $50,400

Ireland’s tax rate of 48 percent is much higher than the 40 percent average in Northern Europe. In fact, Northern Europe is the region with the world's second-highest personal income tax rates, according to KPMG.

The Irish government, which has been trying to bridge a big fiscal gap after the financial crisis, raised the top rate by one percentage point for a third-consecutive 

9. Finland
Highest income tax rate: 49.2%
Average 2010 income: $49,000

Finland’s current marginal rate of 49.2 percent comes into effect at $91,000. The country has been reducing its top marginal rate from 53.5 percent in 2004 to put more money into the pockets of households in order to fight the effects of inflation.

Municipal tax rates are also significant in Finland — varying between 16.25 percent and 21.5 percent. If an individual 

5. (Tied) United Kingdom
Highest income tax rate: 50%
Average 2010 income: $52,320

The U.K. increased its highest tax rate by 10 percentage points in 2010 to 50 percent, joining the ranks of only three other countries with such a high marginal rate. In March, the government backtracked and cut the tax band for the highest earners to 45 percent, effective from April 2013.

As part of the reforms, the government also raised the income tax 

5. (Tied) Japan
Highest income tax rate: 50%
Average 2010 income: $53,200

Japan is the only Asian country to make the list of the top 10. Its top tax rate of 50 percent is more than double Asia’s average rate of 23 percent.

The country’s highest income tax rate is broken into two parts with a marginal rate of 40 percent, which comes into effect at around $217,000, plus an additional 10 percent municipal tax. Social security taxes 

5. (Tied) Belgium
Highest income tax rate: 50%
Average 2010 income: $52,700

Belgium’s highest tax rate of 50 percent is 5 percentage points higher than the average for Western Europe, which has the highest personal tax rates of any region globally.

The highest marginal tax rate kicks in at $46,900 of income. The country’s employee social security rate is 13 percent with employer contributions at 35 percent. Municipal taxes can be up to 11 percent 

5. (Tied) Austria
Highest income tax rate: 50%
Average 2010 income: $50,700

Austria, which is often ranked as one of the world’s best places to live, levies a high income tax and social security burden on households.

Its highest marginal tax rate comes into effect at $80,000 of taxable income. The country’s social security rate ranges from 17 percent to 18 percent. Special payments for workers like a holiday bonus also taxed at 6% 

4. Netherlands
Highest income tax rate: 52%
Average 2010 income: $57,000

Holland's highest tax rate of 52 percent is much higher than the regional average of 45.7 percent in Western Europe.

The country’s top marginal tax rate kicks in at about $74,500 of taxable income. Annual property taxes generally range between $470 and $800. Other notable taxes include a capital gains tax of 25 percent, a land transfer tax of 6 percent and an inheritance 

3. Denmark
Highest income tax rate: 55.4%
Average 2010 income: $64,000

Denmark’s top marginal rate has come down from 62.3 percent in 2008 to 55.4 percent today after the government reached a deal to cut taxes worth $4.8 billion in 2009 to boost the economy. But the country still has the world's third-highest income tax rate.

Denmark’s current top tax rate kicks in at $76,000. Dividend income and capital gains are generally taxed between 28 

2. Sweden
Highest income tax rate: 56.6%
Average 2010 income: $48,800

Sweden is one of eight European nations to make the list of countries with the highest income tax rates in the world. It also tops neighboring Scandinavian countries, which all have the tax brackets of over 48 percent.

Sweden’s marginal top tax rate kicks in at $81,000. Employees pay a social security tax of 7 percent, capped at a maximum contribution of $4,300. Employers are

1. Aruba
Highest income tax rate: 58.95%
Average 2010 income: N/A

Aruba, a Dutch territory, has the highest income tax rate in the world. It is also the only country in the Americas to make the top 10 list.

The tax rate used to be as high as 60 percent before 2007. The current top marginal rate of 59 percent kicks in at around $165,000. Married individuals have a lower maximum rate of 55.85 percent, compared with single taxpayers at 58.95 percent

Thompson Resigns as CEO of Yahoo

Yahoo Inc. ended the brief tenure of its latest chief executive after a flap over a flawed biography of him in a regulatory filing spiraled into a major embarrassment for the ailing Internet company and a big victory for an activist investor.

Scott Thompson, whom Yahoo hired as CEO in January, agreed to resign over the weekend after the company's board obtained evidence that contradicted his claim of innocence about his misstated academic record, people familiar with the matter said.

In particular, an executive-search firm provided Yahoo with information that appeared to show Mr. Thompson years ago had knowingly claimed

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