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Taxation in Delaware

Taxation in Delaware

Delaware is a respected business jurisdiction in the USA and a tax shelter for those looking to register their offshore companies and protect their money. There are several tax advantages offered in Delaware, an American state open to all sorts of businesses. Our company formation agents in USA can provide you with in-depth information about how you can open a company here and about the taxes in Delaware.

What types of taxes are imposed in Delaware?

Delaware franchise tax and the corporate income tax are imposed for limited liability companies and general and limited partnerships in Delaware. It is good to know that the taxation on the personal state tax return is made only if the company’s revenues pass through individually.

Foreign entrepreneurs who want to set up a branch in USA have our services at their disposal. Our team of company formation agents in USA has an extensive experience in a wide range of aspects related to the incorporation of a company in any American state. It is important to have support from your side when preparing the documents, registering with the tax authorities, and obtaining the necessary business licenses. Contact us as soon as you decide on this type of structure.

Corporations and the franchise tax in Delaware

The franchise tax is calculated in two different ways: the Authorized Shared Method and the Assumed Capital Value Method, as seen in the tables below:

  • The franchise tax and the Authorized Share Method – the flat fee is imposed on the number of the authorized shares in the corporation in Delaware.
SharesFlat Fee
Up to 5,000$175
Between 5,001 and 10,000 $250
10,000 and more $250 plus $85 for each additional 10,000 or for a fraction of it
  • The franchise tax and the Assumed Capital Value Method 

USD 400 is the tax rate using this method (franchise tax and the Assumed Capital Value Method) per USD 1,000,000 of the assumed par value capital of the business. However, using this method requires providing numbers for all issued shares and total gross assets as stated on the corporation’s federal tax return in Delaware. For a better understanding of the franchise tax in Delaware, we suggest you discuss it with our local tax agents.

Tax reliefs for offshore companies in Delaware

Delaware offshore limited liability companies with no business activities in this state are not subject to taxation, meaning that there is no federal or state income taxes, no inheritance tax, and no fees for the transfer of shares. However, a license fee is imposed by the government for offshore LLCs in Delaware.

Would you like to know more about the taxes in Delaware? Our team of experts can explain more about Delaware state taxes or Delaware state income tax.

We invite foreigners who want to open a company in Delaware to discuss all the details with our local agents.

Is there a sales tax imposed in Delaware?

No, there is no sales tax in Delaware. The state is among the few others in USA that does not impose a sales tax on goods and services provided. Having no sales tax in Delaware is for sure a great benefit for local and international entrepreneurs. We invite you to solicit information about how to create an offshore company in Delaware and find out details about the advantages of opening a business in this state. You can also request support if you want to start a business in USA regardless of the chosen state for future operations.

Our tax experts can explain more about Delaware LLC taxes, so that you know the type of business you want to develop in this American state. It is quite important to have an idea about the business taxes in Delaware.

Corporate tax for companies in Delaware

Without VAT and sales tax, Delaware is among the favored states for doing business from a taxation point of view. LLCs in Delaware are subject to incomes that are divided among the shareholders. Each of them must pay the personal income tax, besides considering the corporate income tax which represents 8.7%, as a member of a company.

Taxation for partnerships in Delaware

A flat annual fee of around USD 300 must be paid to the state by general partnerships registered in Delaware. However, this annual tax is separate from the income from partnerships which is distributed to the individual partners, who then must pay the tax on the amount distributed to them on both federal and state tax returns. Our team can tell you more about Delaware income tax.

Taxation for sole proprietorships in Delaware

It is important to specify that income from your business is delivered to you as the sole trader, which is why you will pay tax to the American state on that income. An example in this sense is the following. If your sole proprietorship registered a net income of USD 100,000, the tax is paid on this amount, according to the state tax return. But the rate varies depending on the overall taxable income for the year in question. You can discuss more with our specialists about the Delaware tax rate, but also about the Delaware corporate tax, if applicable for the company you own.

Why is Delaware considered a tax haven?

To better understand why many local and foreign entrepreneurs prefer Delaware for business development, you need to know what tax haven means. This is, in fact, a method by which taxes can be reduced in a company. There is a concrete definition made by specialists in this sense, and that refers to the fact that USD 1 can be recovered for every USD 1 spent in the last four years in the company. Each country has its laws and definitions for tax haven, but, in principle, the idea of tax haven must bring a major benefit in countries where taxation is quite high.

Thus, it can be said that Delaware is a tax haven and practically an excellent business destination from a tax point of view. Delaware corporations benefit from a favorable tax system. For example, there is no Delaware corporate tax, if the respective company does not conduct the operations in this state. In addition, the respective company is subject to a lower Delaware franchise tax. On the other hand, Delaware is among the few states where no sales tax is imposed. Therefore, there is no sales tax in Delaware, whether you do business in this state or not.

Furthermore, there is no Delaware corporate tax on goods and services provided by a Delaware company operating outside this American state. We recommend that you consider specialized help to understand Delaware state taxes better when you want to open a business.

Other issues related to taxes in Delaware

Delaware state income tax does not apply to subsidiaries in this state that transfer intangible assets. Practically, these intangible assets are not taxed. Thus, the enterprise can withhold the money that can be sent to the subsidiary in the country in which it is registered. Would you like to open a company in USA and understand the taxes you need to pay? Our local agents can explain the procedures and provide you with the necessary information.

Choosing Delaware for business development

Delaware is a state with its legislation, especially regarding the taxation of companies. With a favorable tax regime and known as a tax shelter, Delaware is a top destination for the creation and development of businesses of any kind, whether the activities are carried out in this state or not. Practically, it can be said that there is a balance because fewer taxes mean more benefits for local and foreign entrepreneurs who can set up their businesses here, create new places, and invest in a highly beneficial business climate.

We invite you to discuss more about business taxes in Delaware with our local experts.

Entrepreneurs who want to set up an LLC company in Delaware can do so with USD 1 as minimum share capital. Only one shareholder is needed to establish this structure and to open a bank account. Among the benefits of this structure, we mention the quick incorporation, the advantageous tax system, and the possibility of doing business outside the USA. We invite you to contact our team of company formation agents in USA and discuss more on this topic. We can also explain the Delaware income tax if applicable for your business.

The personal income tax in Delaware

In Delaware, the personal income tax for sums over $60,000 is set at a 6.60% rate, which also represents the maximum personal income tax. As for the income lower than $60,000, the imposed tax ranges between 2.2% si 5.55% rate. Please contact us if you want to open a company in USA and want to know the related taxes.

Penalties for companies in Delaware

If companies do not respect the period in which the taxes must be paid, these are subject to a 1% penalty each day or 5% per month but may vary. Also, an interest of 1% is added to the entire sum until it is paid. One should also consider that a penalty of ½ % but not above 25% can be imposed for enterprises in USA that do not pay the fees for the submitted returns. 

We invite you to contact our specialists for assistance in USA company formation and tax compliance for each state. Taxes in Delaware is a topic that can be discussed with our local experts. We can help you start a business in USA.