The rumour that Delaware is a tax haven refuses to die. In the same way, plenty of other legends surround the tax treatment of the US LLC. Here we deal with the most widespread misconceptions.
Form your zero-tax LLC now#1 Delaware is a tax haven
Delaware offers no tax advantages whatsoever over other US states. And not only in the context of a zero-tax LLC. Companies that pay regular tax in the US also gain absolutely no tax advantages from having their registered office in Delaware (the exception: you are a group the size of Coca-Cola). The reasons Delaware is so popular as the state of registration for US companies are not tax reasons at all.
#2 The state you choose makes a tax difference
It makes no difference at all in which US state your zero-tax LLC is formed. The tax advantages (that is, tax freedom in the US) do not depend on the state. Note, however, that some states levy flat taxes that do not depend on profit. California, for example, has a franchise tax of $800 a year that every company registered there has to pay, a zero-tax LLC included.
#3 With an LLC I can get around EU VAT
You cannot get around EU VAT with an LLC. Whether a supply is subject to VAT, however, depends on the context.
If, for example, your customers are consumers in the EU and you sell automated digital services (e-books, online memberships, access to videos, software, downloads, courses and so on), you have to charge and pay over the EU VAT that applies in the EU consumer's country of residence.
You then have to register your LLC for VAT in the EU.
No VAT is due if you provide non-automated services to EU consumers from outside the EU, for example coaching, language lessons or consulting via Zoom.
Different rules apply in the B2B sector.
#4 The LLC must not do business in the US
A zero-tax LLC can do business in the US without putting its tax exemption at risk, as long as it has no permanent establishment there. The US definition of a permanent establishment differs from the European one, though. Put simply, a permanent establishment is triggered if you have staff in the US (employees or freelancers). If that applies to you, you definitely need advice. Working with large US service providers such as Amazon FBA, on the other hand, does not trigger a permanent establishment.
Form your zero-tax LLC now