Key Takeaways

  • The Virginia corporate income tax rate remains at 6% in 2025—unchanged since 1972.
  • Virginia uses a three-factor apportionment formula based on payroll, property, and sales.
  • Several tax credits are available to reduce corporate tax liabilities.
  • Corporations must also comply with additional business taxes such as sales tax, withholding tax, and unemployment insurance tax.
  • Virginia offers an automatic 6-month extension to file corporate tax returns, though taxes must still be paid by the original due date.

The Virginia corporate income tax is one of the lowest in the country, making this a very business-friendly state. The stable tax structures offered by this state has made it a popular home for businesses from around the country.

All About Virginia Taxes

Virginia is well-known for maintaining fiscal practices that are more conservative than those in other states. The tax structure in Virginia is very stable, and it also provides some of the fairest tax rates in the country. Virginia's General Assembly has consistently worked to keep tax rates competitive across multiple industries and to remove tax difficulties.

Virginia's corporate income tax rate has stayed the same since 1972 and is one of the lowest in the country. Another benefit of Virginia's corporate taxes is that items taxed by the state are generally not taxed again locally, with the only exception being sales and use taxes.

Taxable corporate income in Virginia is subject to a 6 percent tax rate. A three-part formula is used to decide what counts as taxable income. This formula takes into account issues such as:

  1. Payroll.
  2. Property.
  3. Sales.

Corporations in Virginia can lower their tax burden by taking advantage of several available credits:

  1. Day care investment tax credit.
  2. Major business facility job tax credit.
  3. Recycling equipment tax credit.
  4. Worker retraining tax credit.

Virginia Corporate Income Tax Rate 2025

As of 2025, the Virginia corporate income tax rate remains steady at 6%, making it one of the lowest flat rates in the country. This rate has not changed since 1972, underscoring Virginia’s commitment to tax stability and predictability.

The 6% tax applies to Virginia taxable income, which is typically calculated using a three-factor apportionment formula. This formula considers:

  • The proportion of total payroll spent in Virginia,
  • The proportion of total property located in Virginia, and
  • The proportion of sales made in Virginia.

This formula helps multistate corporations determine how much of their overall income is subject to Virginia taxation.

For pass-through entities like S corporations or partnerships, income is not taxed at the entity level but passes through to individual shareholders or partners, who report it on their personal tax returns. However, these businesses may still be subject to minimum fees, withholding obligations, or franchise taxes depending on their structure.

Different Virginia Taxes and Fees

There are several taxes and fees that apply to Virginia corporations outside of the corporate income tax. For example, if your corporation can operate in this state, you must pay an annual registration fee. This fee, based on your corporation's shares, can be as low as $100 and as high as $1,700. If your company is a non-stock corporation formed after 1970, your annual registration fee will be $25.

Virginia requires a state withholding tax for employers that must withhold taxes from payments based on federal law. If federal law requires your corporation to file a withholding return, you must complete three steps in Virginia:

  1. Register for the withholding tax.
  2. File a withholding tax return.
  3. Pay the required taxes to the Virginia Department of Taxation.

If your company has more than three employees, you must fulfill one of three requirements:

  1. Purchase a worker's compensation policy from a private insurer.
  2. Obtain a self-insurance certificate from the Virginia Workers' Compensation Commission.
  3. Possess membership in a licensed self-insurance association.

There are certain circumstances where your business will need to pay an unemployment insurance tax. This tax applies if you pay wages over $1,500 in a quarter or if you have one or more employees for 20 weeks in a calendar year. The unemployment tax rate can range between 0.29 and 6.39 percent. This tax applies to the first $8,000 earned by every employee.

There is a 5 percent sales and use tax in Virginia, and the state returns 1 percent of these taxes to local jurisdictions. Sales taxes apply to both retails sales and tangible personal property leases, unless these sales are exempt from the tax. Sellers that do not automatically collect sales taxes must pay a use tax on purchase. Some purchase made by distributors and manufacturers are exempt from these taxes. Lastly, Virginia applies a utility consumption tax based on electricity and gas usage.

Key Tax Credits for Virginia Corporations

Virginia provides a range of tax credits that corporations can use to reduce their tax burden. These include:

  • Major Business Facility Job Tax Credit: For creating a minimum number of new full-time jobs in a qualified business facility.
  • Worker Retraining Tax Credit: For training expenses incurred for eligible employees through community college courses or approved private institutions.
  • Recycling Equipment Tax Credit: For companies investing in machinery used for recycling processes.
  • Day Care Investment Tax Credit: For contributions to licensed child care facilities.
  • Green Job Creation Tax Credit: For businesses that create full-time green jobs, offering up to $500 per job annually for five years.

Corporations must apply for these credits and meet specific eligibility and documentation requirements. Most are non-refundable but may be carried forward for several years if not fully used in a single tax year.

Applying for a Tax Extension

Corporate tax returns in Virginia are due on the 15th day of the fourth month after a tax year's end. When filing based on the calendar year, your return is due on April 15. Tax extensions are available for corporations that are unable to meet this deadline.

Virginia provides automatic tax extensions, meaning you will not need to file an application. Corporations receive an automatic six-month state extension. Some corporations will receive a deadline that is 30 days after a federal extension deadline if this date is later than the state deadline. When a corporation gets approved for a federal extension, it will usually need to file its return by Sept. 15.

A tax extension provides additional time to file your return, but not to pay your taxes. If you want to extend your filing date in Virginia, you must have paid 90 percent of your owed taxes by the original April 15 due date. Interest and penalties will apply to late tax payments.

Virginia Corporate Filing and Payment Requirements

Virginia corporate income tax returns are generally due by the 15th day of the fourth month after the end of the tax year (April 15 for calendar-year filers).

Key filing and payment guidelines include:

  • Automatic 6-month extension to file is granted, but tax payments are still due by the original due date.
  • Corporations must pay at least 90% of their tax liability by the original due date to avoid penalties.
  • Late payments incur interest at the federal underpayment rate + 2%, and penalties of up to 30% may apply for underpayment or failure to file.
  • Payments and filings can be submitted electronically through Virginia's Business iFile portal.

It's crucial for corporations to maintain compliance to avoid costly penalties and interest.

Frequently Asked Questions

  1. What is the Virginia corporate income tax rate for 2025?
    The rate is 6%, unchanged since 1972.
  2. Are there any changes expected to the Virginia corporate tax rate soon?
    As of 2025, no legislation has been passed to change the current 6% rate.
  3. What types of businesses are subject to corporate income tax in Virginia?
    Traditional C corporations are subject to the tax. S corporations and partnerships generally pass through income to individual taxpayers.
  4. Can I get an extension to file my Virginia corporate return?
    Yes, Virginia offers an automatic 6-month extension to file, but taxes must still be paid by the original due date.
  5. What tax credits can help reduce my corporate tax liability in Virginia?
    Eligible businesses can claim credits like the Major Business Facility Job Credit, Worker Retraining Credit, and Recycling Equipment Credit, among others.

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