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Delaware

Corporation

Delaware is one of the world’s most popular jurisdictions to incorporate a company. Nearly half of US publicly traded companies and more than 65 percent of all Fortune 500 companies are incorporated in Delaware. Including giants such as Apple, Coca-Cola, Google, and Wal-Mart.

Delaware stands out for its separate Court of Chancery, the oldest business court in the US, specialized corporate law cases. The Court of Chancery use judges instead of juries and are usually expertized in complex corporate law matters.

Delaware Court maintains the most advanced and up-to-date case law, that allows for predictability and therefore decreasing liability and litigation among Delaware companies.

These predictable laws allow corporations to make better assessments of the probable outcomes of litigation or the advisability of settling a case.

The legal and liability protection of established corporate laws in Delaware makes the jurisdiction one of the most reputable business-friendly states.

The State of Delaware has also an attractive tax regime. Delaware corporations doing business exclusively outside of the State are exempt from State tax. Furthermore, there is no inheritance tax on stock held by non-Delaware residents, no state sales tax on intangible personal property and share of stock owned by non-residents are not subject to Delaware taxes.

Companies incorporated in Delaware are confidential. Details of shareholders, directors, and officers are not disclosed in the company formation documents and are not available to the public.

Delaware corporations are flexible structures, the same person may be the sole shareholder, the director, and the officer.

In addition, it has one of the quickest company registration procedures and lowest costs of incorporations in all United States.

Delaware is an excellent jurisdiction for startups and companies seeking financing. Venture capitalists, angel investors, investments banks and other investors prefer Delaware corporations above all other states and corporate structures.

Taxes

Tax residency – A corporation organized or established under the Delaware General Corporation Law is tax resident in Delaware and the United States.

Basis – Federal income tax is levied on US effectively connected income (ECI), while Delaware state income tax is levied on income arising in Delaware.

Taxation – Delaware corporations may elect to be taxed as an S-Corp or a C-Corp.

C-corporations are subject to federal income tax and state income tax.

S-corporations are closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code.

S-corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders, who must then report the income or loss on their own individual income tax returns.

To be treated as an S-corp, shareholders must be natural persons and citizens/residents of the United States.

Tax rate – Resident corporations are subject to tax at a 21% rate.

Income derived from Delaware is subject to State Income Tax at 8.7%.

Capital gains – Gains or losses derived from assets held for more than 12 months are treated as long-term capital gains or losses, gains and losses derived from assets held for 12 months or less are treated as short-term capital gains or losses.

Net gains are the excess of net long-term capital gain over the net short-term capital loss. Capital losses may be used to offset capital gains. Excess of losses may be carried back three years and carried forward five years to offset capital gains.

Net gains are subject to tax at applicable federal income tax rates.

Dividends – Dividends received by a US corporation from another US corporation may be 70% deductible income. Dividend deduction may be increased up to 80% if the recipient holds between 20%-80% shares of the distributor.

Dividends payments between US corporations that are members of the same Group may be exempted. Certain Corporations may be subject to Accumulated earning tax on undistributed profits if it is not justified that the accumulation is based on business needs. Certain Holding Companies that receive substantial passive income may be subject to Personal Holding Company Tax on undistributed profits at a 15% rate.

Dividends received from foreign entities may be considered deductible income.

Interests – Interests are generally included in the taxable base.

Royalties – Royalties are generally included in the taxable base.

Foreign-source income – Corporations are taxed on their worldwide income, including foreign-branch income when earned and foreign-source dividends received. Relief from double taxation may be available by tax treaties, tax credit or claiming a deduction for foreign tax paid.

A Foreign subsidiary owned by more than 50% by United States tax residents, is considered a controlled foreign company (CFC). Certain undistributed income (Subpart F income) retained in a CFC will be subject to taxation.

Passive income retained in a foreign investment company (75% or more of the income is passive or at least 50% of the assets held produce passive income) may be also subject to taxation.

Foreign-source income may be exempt from Delaware state income tax.

Withholding taxes – Dividends, interests, and royalties paid to non-residents are usually subject to withholding tax at a 30% tax rate. Withholding tax may be reduced or exempted under a tax treaty.

Losses – Losses arising from taxable income may be carried forward for 20 years and carryback for 2 years.

Inventory - Inventory may be valued at the lower of acquisition/production costs or market value. To determine costs are allowed First in first out (FIFO) and Last in first out (LIFO) methods.

Anti-avoidance rules – Transactions between related parties must be carried out on arm’s length terms. If a company is not in compliance, the IRS may raise taxable income and tax payable.

Thin capitalization rules apply to disallow interest payments related to excess debt and make these payments as dividends.

A Foreign subsidiary owned by more than 50% by United States tax residents, is considered a controlled foreign company (CFC). Certain undistributed income (Subpart F income) retained in a CFC will be subject to taxation.

Passive income retained in a foreign investment company (75% or more of the income is passive or at least 50% of the assets held produce passive income) may be also subject to taxation.

Labor taxes – Employers may be subject to social security contributions tax of 6.20% on the first USD 127,200 of wages paid to employees and 1.45% of Medicare tax on any wages, regardless of amount.

In addition, employers must pay, under certain conditions, federal unemployment insurance tax (FUTA) of 6.2% on the first USD 7,000 of wages paid to employees meeting certain criteria.

Tax credits and incentives – A tax credit or deduction is usually available for foreign tax paid.

Business and employment credits are also available business to provide special incentives for the achievement of certain economic objectives.

Credits may be also available for qualified research expenditures (QREs) to develop new or improved products, manufacturing processes, or software in the United States.

Qualifying private activity bonds interests may be exempt from federal income tax.

Compliance – On average, a company in the United States may require 11 payments and 175 hours per year to prepare, file and pay corporate income tax, value-added tax, and labor taxes, including payroll taxes and social contributions.

Personal income tax – An individual is deemed to be tax resident in the United States if he or she is a citizen or permanent resident or he or she is physically present in the US during 31 days in a year and a total of 183 equivalent days during the current year and prior two years.

US citizens and permanent residents are tax residents, no matter the days spent in the country during a year.

Tax residents are subject to tax on their worldwide income.

The federal tax rate is progressive at rates ranging from 0% to 39.6%. Delaware personal income tax rates are progressive up to 6.6%.

Self-employed individuals may be subject to self-employment tax at 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Capital gains derived from assets held more than 12 months are subject to a maximum tax rate of 20%. Gains derived from assets held 12 months or less are subject to tax at standard rates.

Dividends, interests, royalties and rental income are subject to individual income tax at applicable rates.

In addition, individuals may be subject to net investment income tax (also known as Medicare contribution tax) on investment income received by individuals with modified adjusted gross income above certain amounts.

Other taxes – There are no value-added tax or sales tax in Delaware.

Real property ownership and transfer of assets are subject to local taxes in Delaware.

Estate inheritances are taxed in the U.S.

There are no wealth taxes in the United States.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 21% Offshore Income Tax Rate
  • 21% Corporate Tax Rate
  • 38% Capital Gains Tax Rate
  • 11.4% Dividends Received
  • 30% Dividends Withholding Tax Rate
  • 30% Interests Withholding Tax Rate
  • 30% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • 20 Losses carryforward (years)
  • 7.65% Social Security Employee
  • 15.3% Social Security Employer
  • 46% Personal Income Tax Rate
  • 0% VAT Rate
  • 84 Tax Treaties

Country details

United States
USD
Washington
North America
e n - U S , e s - U S , h a w , f r
310232863

The United States of America (USA) is a North American country constituted in a federal constitutional republic composed of 50 states and a federal district.

It is located between the Pacific and Atlantic Oceans, borders Canada to the north and Mexico to the south. The state of Alaska is in the northwest of the continent, bordering Canada to the east and separated from Russia to the west by the Bering Strait. The state of Hawaii is a Polynesian archipelago in the middle of the Pacific Ocean, and it is the only American state that is not located in the American continent. The country also has several territories in the Caribbean Sea and in the Pacific.

With 9.83 million sq. km, and with more than 324 million inhabitants, the country is the fourth largest in total area and the third in population.

The capital is Washington D.C. However, New York is the trade and financial center and the most populated city, with over 8 million inhabitants, and 22 million within its metropolitan area. Other large urban areas include Los Angeles, Chicago, Dallas, Houston, Philadelphia, Miami, and Atlanta, among others. English is the official language of all states and territories, although some of them have their own co-official language.

As it is one of the world’s most ethnically diverse and multicultural nations, there are more than 20 languages with an important number of speakers, such as Spanish, Chinese, French, German, Tagalog, Vietnamese and Italian, among others.

The United States is a constitutional, democratic and representative republic. In the US federalist system, citizens are generally subject to three levels of government: federal, state, and local; The duties of local government are commonly divided between the county and municipal governments. In almost all cases, executive and legislative officials are elected by direct suffrage of the citizens of the district.

Its official currency is the US Dollar (USD), which is the most traded currency, the world’s primary reserve currency and the currency used in the international markets for commodities such as gold and petroleum.

The USA is the largest economy worldwide in nominal terms and the second, after China, in purchasing power parity terms, home of the largest multinationals and well-known brands worldwide and leader in technological innovation and scientific research.

It has a mixed capitalist economy, characterized by abundant natural resources, like coal, natural gas, oil and uranium, developed infrastructure and high productivity.

Its economy is mostly based on the services sector, but it maintains large and competitive industrial sector, specialized in high technology, where the chemical, military, energy, oil, metallurgical, steelworks, automotive, aeronautics, electronics and IT are the largest.

It is the third largest oil producer in the world, as well as the largest importer. It is also the first world producer of electric power and nuclear power, as well as liquefied natural gas, sulfur, phosphates and salt. Despite primary sector accounts about 1% of its GDP, the country is one of the world’s largest producers of a wide variety of agricultural, livestock and fishing products.

Regarding the services sector, the largest of the USA economy, its most important activities are banking, insurance, education, healthcare, research, transport, trade, and tourism.

The US financial market is the most extensive and the most complex worldwide, and stands out for its influence in any economic decision at an international level. New York is the most important financial center worldwide, the New York Stock Exchange (NYSE) is also the largest world’s capital market and the NASDAQ is the third one. USA is also the second most touristic country worldwide, ranking 2nd, after France and ahead of Spain.

Delaware is one of the fifty states that, together with Washington D., form the United States of America. Its capital is Dover and its most populated city, Wilmington.

It is located in the South region of the country, South Atlantic division, bordering to the north with Pennsylvania, to the northeast with the bay of Delaware that separates it of New Jersey, to the east with the Atlantic Ocean and to the South with Maryland.

With 6447 km² it is the second less extensive state, with around 900,000, the sixth least populated, and with 139,28 hab / km², the sixth most densely populated.

Despite its small size, Delaware is a large financial center. The services sector is the most important, with 79% of GDP. The provision of financial and real estate services is 38% of the state's GDP. More than 200 thousand companies are based in the state. Therefore, this state is also one of the largest banking centers in the United States.

Agriculture and cattle ranching together account for 1% of the state's GDP. Milk and cherries are the main product of Delaware's agricultural industry.

The secondary sector accounts for 20% of Delaware's GDP. The main industrialized products manufactured in the state are chemical products, transport equipment (mainly automobiles), chemicals, processed foods and paper.

Tax treaties

Country Type Date Signed
Pakistan DTC  1957-07-01
Mexico DTC  1992-09-18
Ukraine DTC  1994-03-04
Cayman Islands TIEA 2013-11-29
Barbados DTC  1984-12-31
Guernsey TIEA 2002-09-19
Korea, Republic of DTC  1976-06-04
Antigua and Barbuda TIEA 2001-12-06
Kazakhstan DTC  1993-10-24
Lithuania DTC  1998-01-15
Gibraltar TIEA 2009-03-31
Australia DTC  1982-08-06
Bangladesh DTC  2004-09-26
Saint Lucia TIEA 1987-01-30
United Kingdom DTC  2001-07-24
Cyprus DTC  1984-03-19
Slovakia DTC  1993-10-08
Jamaica DTC  1980-12-21
Japan DTC  2003-11-06
Aruba TIEA 2003-11-21
Dominica TIEA 1987-10-01
Costa Rica TIEA 1989-03-15
Switzerland DTC  1996-10-02
Morocco DTC  1977-08-01
China DTC  1984-04-30
Bermuda DTC  1986-07-11
Venezuela DTC  1999-01-25
Monaco TIEA 2009-09-08
Dominican Republic TIEA 1989-08-07
Germany DTC  1989-08-29
Luxembourg DTC  1996-04-03
Poland DTC  1974-10-08
Israel DTC  1975-11-20
Sint Maarten TIEA 2002-04-17
Guyana TIEA 1992-07-22
Indonesia DTC  1988-07-11
Egypt DTC  1980-08-24
Austria DTC  1996-05-31
Isle of Man TIEA 2002-10-03
Czech Republic DTC  1993-09-16
Sri Lanka DTC  1985-03-14
Marshall Islands TIEA 1991-03-14
Portugal DTC  1994-09-06
Estonia DTC  1998-01-15
Sweden DTC  1994-09-01
Ireland DTC  1997-07-28
Latvia DTC  1998-01-15
Hungary DTC  1979-02-12
Netherlands DTC  1992-12-18
Tunisia DTC  1985-06-17
Trinidad and Tobago DTC  1970-01-09
Slovenia DTC  1999-06-21
Malta DTC  2008-08-08
Panama TIEA 2010-11-30
Colombia TIEA 2001-03-30
Brazil TIEA 2006-03-20
Curaçao TIEA 2002-04-17
Italy DTC  1999-08-25
New Zealand DTC  1982-07-23
Thailand DTC  1996-11-26
Finland DTC  1989-09-21
Greece DTC  1950-02-20
France DTC  1994-08-31
Mauritius TIEA 2013-12-27
Bahamas, The TIEA 2002-01-25
India DTC  1989-09-12
Norway DTC  1971-12-03
Russian Federation DTC  1992-06-17
Belgium DTC  2006-11-27
Chile DTC  2010-02-04
Peru TIEA 1990-02-15
Grenada TIEA 1986-12-18
Bulgaria DTC  2007-02-23
Philippines DTC  1976-10-01
Canada DTC  1980-09-26
Iceland DTC  2007-10-23
Spain DTC  1990-02-22
Denmark DTC  1999-08-19
South Africa DTC  1997-02-17
Romania DTC  1973-12-04
Liechtenstein TIEA 2008-12-08
Honduras TIEA 1990-09-27
Turkey DTC  1996-03-28
Jersey TIEA 2002-11-04

Tax treaties Map

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