What taxes a C Corporation based in Delaware must pay?

Some owners ask: Do I have to pay any taxes for my C Corporation based in Delaware? Although there are some advantages to incorporate in Delaware from the tax standpoint, but the below mentioned tax reports must be submitted by a C Corporation based in Delaware:

• Federal Income tax return (form 1120). Every US based company; including a Delaware based company, must submit an Income tax return to the Internal Revenue Service (IRS), even if there is no revenue for the tax year. The income tax rate for Corporations is 21%^[1] of the taxable income (taxable income = revenue minus expenses). The due date for submitting Income tax return and paying the tax is usually April 15 of the following year.

• Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (form 5472). This form is for non-US owners. The form must be submitted to the IRS with the Income tax return. The purpose of this form is to show transactions between the company and the foreign owner.

• Annual franchise tax report. Each Delaware based company must submit the Annual franchise tax report to the Division of Corporations of the State of Delaware and pay annual franchise tax regardless of the company’s activity. The due date for the Annual franchise tax report is March 1 of the following year.

• State Income tax return (form 1100). Delaware does not impose income tax on corporations registered in the state, but does not do business in the state. However, every corporation doing business in Delaware is required to file a corporate income tax return and pay a tax of 8.7% on its federal taxable income allocated and apportioned to Delaware.

The above-mentioned are the main forms or reports a C Corporation must handle. Besides the above mentioned a C Corporation maybe required to submit additional reports and pay additional taxes. For example, if the C Corporation has employees then it isrequired to pay payroll taxes. If a C Corporation has transactions during the tax year, depending on the transaction’s types additional forms may need to be submitted. Some examples are below:

• Form 1099. The 1099 forms (NEC, MISC, INT, DIV) are used to report payments made to U.S. contractors, LLC’s (or attorneys) for different purposes. One copy must be e-filed to the IRS and another sent to the U.S. contractor or supplier.

• Form 1042-S. The 1042-S form is filed to report dividends, interest, or gains in a dissolution for non-US citizens receiving income from a US corporation.

• Form 5452. Form 5452 is filed to report non-dividend distributions from a corporation, such as capital paybacks

• Forms W-8BEN, W-8BEN-E. Although there is not need to submit these forms to the IRS and in most cases with holdand pay any taxes on behalf of a foreign contractor or company, but you have to file these forms every time you pay to non-US contractors or companies.