Delaware Corporate Tax: Everything Businesses Need to Know (2025)

Delaware has long been known as the ideal state to set up a company in the US, when More than 65% of Fortune 500 companies have chosen Delaware as the place to establish the legal headquarters for their US business. 

Delaware corporate tax is one of the major reasons why many businesses decide to open a company in this state in the US.

So how is corporate tax in Delaware different from that in other states? The following article by GLA US Tax Expert will provide valuable knowledge to help you understand the Delaware tax system.

1. Advantages of the Delaware tax system 

There are many reasons that attract domestic and foreign business owners to establish companies in Delaware, the most typical of which include:

1.1 Delaware has a business-friendly tax system

Some of the notable tax policy features that make foreign business owners want to open a company in Delaware include:

1. If your company has direct business operations in Delaware, you will be subject to corporate income tax at theThe tax rate is 8.7% on net profits.  
2. Delaware no corporate income tax (CIT) for out-of-state income This: Any domestic (incorporated in Delaware) or foreign (incorporated in another country) corporation that conducts business and generates income in Delaware must file a corporate income tax return and pay tax on its taxable income to the Delaware state government. However, if this income is generated outside of Delaware, the Delaware corporation is exempt from tax.
3. Delaware No corporate income tax is imposed on interest, royalties or other similar investments.
4. Delaware kNo sales tax in the state (Sales Tax): Sales tax applied to goods and services at the point of purchase, and is collected by the seller of the goods or services from the purchaser and then remitted to the taxing authority. In Delaware, no business transactions within the state are subject to sales tax.

1.2 Delaware has a tax optimization policy for S-Corporations and Limited Liability Companies.

S-Corporations (or S-Corps for short) and Limited Liability Companies (LLCs) are considered pass-through entities. Therefore, all profits or losses of S-Corps and LLCs are all transferred to the company's shareholders.

Thus, by choosing an S-Corp or LLC, a business can reduce its tax payments. The tax liability now falls on the directors and shareholders of the company (This type is only available to companies with 100% US shareholders, foreigners should consider opening an LLC or C-corp depending on the business purpose of the company).

1.3 Companies in Delaware need to be concerned about annual tax (Franchise tax)

Businesses opening companies in the state must pay annual franchise tax. This is a tax that businesses pay to maintain their right to operate in Delaware. The amount of this tax depends on the size of the company, including the number of shares issued or the value of the company's assets.

1.4 Delaware corporations pay taxes only on special assets. 

If the company owns real estate in the state. Delaware taxes tangible assets such as real estate if there are people living there. 

However, this tax rate is among the lowest of the 50 US states: About 0,55%. This significantly reduces the tax burden for companies.

In addition, certain items in Delaware are subject to excise taxes, such as gasoline and tobacco.

2. What tax incentives do investors receive when establishing a company in Delaware?

Thanks to the above tax policy of Delaware, investors can grasp many opportunities and benefits when opening a company in Delaware.

According to US tax policy, a limited liability company in Delaware (USA), established by a non-resident in the US, will be exempt from corporate income tax in Delaware (USA), if:

• The business is not engaged with a trade or business in the United States (ETOB); or
• The company does not have an office in Delaware (USA) - where the company's employees work directly at the office; or
• The business sells products with delivery points outside the United States.

Your business can learn through the following 2 real-life examples to better understand this opportunity:

Real life example 1

A foreign software company that does not have an office or representative office in the US. This company has its headquarters in Vietnam and its customers are mostly from the US. All business and software exchange activities take place online.

To facilitate transactions with customers in the US, this Vietnamese company opened a limited liability company in Delaware to open a bank account in the US to serve international transactions.

In this case, because:

• Software products created in Vietnam
• Business owner is not a resident of Delaware (USA)
• The Delaware (USA) company is not in the ETOB group, because the work exchange process takes place online.

→ This software company's income is not subject to corporate income tax in Delaware (USA)

Real life example 2

A foreign entrepreneur sells products to the US market using Amazon's Fulfillment by Amazon service. All communication and purchasing activities are managed online by the foreign business owner, who is a Vietnamese citizen. Products are ordered and shipped to Amazon's warehouse, where Amazon employees package the products and ship them to customers in the US.

Amazon is not a representative office/office of this foreign company, but an independent agent with its own business operations with millions of other customers. In this case, because:

• Foreign business owners - who are sellers on Amazon - and are engaged in trade/business activities in the US
• The packaging and shipping process is done within the US territory.

→ This foreign company's income will be subject to corporate income tax in Delaware (USA)

3. What should investors pay attention to regarding taxes when opening a company in Delaware?

3.1 Tax treaties

One of the factors that determines the ability of foreign enterprises to pay corporate income tax in Delaware is tax treaties. If the company owner resides in a country that has a tax treaty with the United States, you do not need to pay corporate income tax on your Delaware company.

Depending on the treaty, a business can prove that its company has a permanent establishment in the country where the business owner is residing. In other words, when the business owner lives, works and pays taxes in the host country, the Double Tax Avoidance Treaty (DTA) can help your business avoid paying corporate income tax in Delaware (USA).

As part of the strengthening of the comprehensive partnership between the United States and Vietnam, the two countries have signed their first income tax treaty and a double taxation avoidance agreement. This means that when a foreign company establishes a company in Delaware (USA) and does not pay corporate income tax in Delaware (USA), it may pay corporate income tax in Vietnam.

3.2 Tax filing process for Delaware companies

Filing taxes in Delaware is not overly complicated, but still requires businesses to comply with some basic regulations. GLA will assist businesses in complying with Delaware tax requirements quickly, accurately and legally.

Each year, businesses must file and pay franchise tax and other taxes (if applicable). Failure to file taxes on time can result in penalties and loss of the right to operate in Delaware.

In addition to taxes and annual casco reports, businesses are also required to submit annual financial reports to the state. This ensures transparency and updates on the company's operations.

4. How will GLA support Businesses in opening and operating companies in Delaware?

Delaware is a great choice for many businesses thanks to its favorable tax policies and advanced legal system. 

However, each business needs to carefully consider the tax and legal requirements to ensure that they are consistent with its business goals and strategies. Understanding Delaware's tax regulations will not only help businesses save costs but also optimize business operations in the long term.

GLA, with 10 years of professional experience in consulting and supporting the establishment of a company in the US, successfully and sustainably operating for many leading companies in Vietnam, will support businesses in:

• Support counseling Open a company in the US in the state of Delaware.
• Consulting on suitable company types, helping businesses optimize business operations
• Assisting US companies in complying with laws and annual requirements legally, accurately and efficiently
• Tax and accounting services and financial reporting according to US accounting standards, accurate, legal, fast, efficient.
• Support open corporate bank account with physical banks, digital banks licensed in the US
• Support opening payment gateways for businesses with PayPal, Stripe, etc.

5. Frequently asked questions when opening a company in Delaware (USA)

Highlights

• Delaware's corporate tax system is one of the main reasons many business owners open a business in the state.
• Delaware's state corporate income tax is 8,7%. Out-of-state income, interest, royalties or investments are exempt from tax.
• Delaware corporations are exempt from sales tax on intrastate transactions. Interstate transactions will require sales tax in the respective state.
• Every year, Delaware companies will only need to declare annual reports and pay annual taxes (Franchise Tax). GLA will support businesses to declare this tax professionally, quickly and effectively when opening a company in Delaware.