Are you tired of hearing names Delaware by people who talk as if they knew? Do you have the impression that every time Delaware is mentioned, anything is said? You don’t really know what it’s about but you want to get rid of the doubt once and for all? This article is for you.
Delaware is a state within the United States; in fact it was the first state in the union.
¿Is Delaware a Tax Haven?
First of all, it is important to defineFiscal Paradise”, since the existing statements have become quite obsolete.
When talking about the historical definitions by agreements, it is necessary to consider the following 4 parameters: secrecy, low or no taxation in general with a differentiated regime, low or no regulation and instances of filing or compliance and ease in terms of constitution of societies.
In my opinion, in order to refer to “tax haven”, all of them must be met. However, in the case of Delaware, only the ease of incorporation of companies is fulfilled, and partially that of secrecy.
On the other hand, it is true that the incorporation of companies in Delaware can be quick and easy, but it is also true in the rest of the United States, with which, associating it with Delaware to segregate from the rest would be incorrect.
In allusion to secrecy, this will only run for the general public. Any foreigner who wants to create entities in Delaware will be required by the Federal Government to report the beneficial owners of the structure. And this will happen regardless of the state of incorporation.
What is different in Delaware is that there are no online public records, as there are, for example, in Florida.
In reference to low or no taxation, we are entering a field of extreme misunderstanding on the part of many of those who talk about the subject.
Delaware is one of the many states that does not have a statewide income tax. Does this mean that by setting up an entity in Delaware I will be exempt from paying taxes? The answer is no.
Any entity incorporated in Delaware must be taxed as much as federal law requires, and federal taxes are orders of magnitude higher than state taxes.
The same is the case with regulation. An entity in Delaware will be regulated by whoever it may be at the state and federal level. It will also fall under the orbit of the strictest regulators in the world.
It is important to mention that, for American tax purposes, LLCs and C-Corps (the two types of entities that a foreigner can incorporate) are taxed in totally different ways, and there is the possibility of not generating taxable events with a structure transparent type LLC.
Still, this will again apply to LLCs incorporated in any state, for federal tax purposes. For this reason it is incorrect to impute this characteristic to “Delaware”.
As you can see, Delaware is a lot less special than many might believe. And now as readers, you will have the tools to identify charlatans, in a context where they certainly exist in abundance.
* By Andrés Burecovics, lawyer, director of B&P Consulting, a consultancy specialized in complex corporate structures, global crypto regulation and export of services.
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