The Virginia corporate income tax rate is a flat 6% on Virginia taxable income, and it has been 6% since 1972.1Virginia Code Commission. Virginia Code 58.1-400 – Imposition of Tax The rate applies uniformly to every dollar of taxable income. There are no graduated brackets. What varies from company to company is not the rate but the base it applies to: how federal taxable income gets adjusted for Virginia, how much of a multistate company’s income is apportioned to the state, and which credits reduce the bill after the 6% is calculated.
Who Pays the 6% Rate
The tax lands on C corporations. Any C corporation incorporated in Virginia, registered with the State Corporation Commission (SCC) to do business here, or receiving income from Virginia sources must file Form 500 each year.2Virginia Department of Taxation. Corporation Income Tax
S corporations do not owe the 6% corporate tax. A corporation that has elected S status federally is automatically treated as an S corporation in Virginia and files Form 502 instead.2Virginia Department of Taxation. Corporation Income Tax Partnerships and LLCs taxed as partnerships also skip the corporate income tax, though they may have withholding obligations for nonresident owners.
Out-of-state corporations owe the tax if they have nexus with Virginia, meaning physical presence such as offices, employees, or property, or economic activity generating revenue from Virginia customers. Federal Public Law 86-272 shields out-of-state companies whose only Virginia activity is soliciting orders for sales of tangible personal property. Once activities exceed that narrow solicitation threshold, Virginia’s tax laws apply in full.3Virginia Code Commission. 23VAC10-120-310 Reports by Corporations Even companies protected by P.L. 86-272 must file a return if they are registered with the SCC.
What the 6% Applies To
Virginia does not tax federal taxable income as reported to the IRS. It starts there and then makes state-specific adjustments.4Virginia Department of Taxation. 2025 Instructions for Virginia Form 500 – Corporation Income Tax Return Relying on the federal number alone will produce the wrong result.
Additions
The most common addition is interest earned on bonds issued by other states or their political subdivisions, to the extent that interest was excluded from federal taxable income.5Virginia Code Commission. Virginia Code 58.1-402 – Virginia Taxable Income Virginia also requires an add-back for interest or dividends on certain federal instrumentality obligations that are exempt from federal income tax but not from state income tax.
Subtractions
Corporations can subtract income from U.S. government obligations, including Treasury bonds, bills, and notes, to the extent that income was included in the federal return but is exempt from state taxation under federal law.5Virginia Code Commission. Virginia Code 58.1-402 – Virginia Taxable Income Certain foreign-source income, including foreign-source interest, dividends, rents, royalties, and gains from the sale of property located outside the United States, may also be subtracted.4Virginia Department of Taxation. 2025 Instructions for Virginia Form 500 – Corporation Income Tax Return
Bonus Depreciation and NOLs
Virginia does not conform to federal bonus depreciation rules enacted under the Tax Cuts and Jobs Act. Corporations that claimed bonus depreciation on the federal return must adjust those amounts for Virginia purposes.4Virginia Department of Taxation. 2025 Instructions for Virginia Form 500 – Corporation Income Tax Return This catches companies with large capital expenditures off guard.
For net operating losses, Virginia conforms to the federal TCJA treatment, which generally repealed NOL carrybacks. There is no separate Virginia NOL computation. The federal NOL deduction flows through as part of the federal taxable income starting point.4Virginia Department of Taxation. 2025 Instructions for Virginia Form 500 – Corporation Income Tax Return
Credits
Virginia offers several tax credits that can lower a corporation’s effective tax bill below 6%. These include credits for major business facility job creation and for qualified research and development expenses, among others.2Virginia Department of Taxation. Corporation Income Tax The credits reduce tax owed after the rate is applied; they do not change the rate itself.
Apportionment for Multistate Corporations
A corporation doing business both inside and outside Virginia does not pay the 6% on all of its income. It apportions income to Virginia based on a formula that reflects how much of its business activity occurs in the state.
Virginia has moved toward a single-sales-factor formula for many types of corporations. Under that method, the share of income taxed in Virginia depends entirely on what percentage of the corporation’s total sales are sourced to the state.6Virginia Department of Taxation. Single Sales Factor Apportionment and Market-Based Sourcing It applies to retail corporations, manufacturers that elect the method, debt buyers, and enterprise data center operations, among others.7Virginia Department of Taxation. 2025 Schedule 500A Instructions The Schedule 500A instructions confirm which method applies to a given industry.
Sales of tangible personal property are sourced to Virginia when goods are delivered to a buyer in the state. Sourcing for services and intangibles varies by industry. Some sectors use market-based sourcing, which attributes revenue to Virginia when the customer receives the benefit there. Others still use cost-of-performance rules, sourcing revenue to the state where the income-producing activity occurs.8Virginia Code Commission. Virginia Code 58.1-416 – When Certain Other Sales Deemed in the Commonwealth
Filing, Extensions, and Estimated Payments
Annual Return
Corporations file Form 500. The return is due on the 15th day of the fourth month after the close of the taxable year, which is April 15 for calendar-year filers. All corporations are required to file returns and make payments electronically.2Virginia Department of Taxation. Corporation Income Tax
Automatic Extension
C corporations receive an automatic seven-month extension to file, pushing the deadline to November 15 for calendar-year filers. Nonprofit corporations and other entities get a six-month extension. The extension covers the return only. At least 90% of any tax owed must still be paid by the original due date, and interest runs on any shortfall from that date.9Virginia Department of Taxation. 2024 Virginia Corporate Income Tax Automatic Extension Payment Voucher Instructions
Estimated Payments
A corporation whose Virginia income tax liability (after credits) is expected to exceed $1,000 must make estimated payments. Four equal installments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year.2Virginia Department of Taxation. Corporation Income Tax For calendar-year filers, those dates are April 15, June 15, September 15, and December 15.
An addition to tax applies when estimated payments fall short. At the federal level, corporations can avoid underpayment penalties by paying at least 90% of the current year’s tax or 100% of the prior year’s tax.10Internal Revenue Service. Estimated Taxes Virginia follows similar logic, with the underpayment addition calculated at the federal underpayment rate plus 2%.
What Happens If You Fall Behind
Late Filing Penalty
Virginia’s late filing penalty accrues at 6% per month or partial month from the original due date, up to a maximum of 30%. It is only assessed if the return is filed more than six months after the original due date.11Virginia Department of Taxation. Penalties and Interest Because C corporations get a seven-month automatic extension, the outcome is binary. File within the extension period and no late filing penalty applies. Miss the extended deadline and the full 30% penalty hits immediately, because six months will already have passed from the original due date.
Interest on Unpaid Tax
Interest runs on any unpaid balance from the original payment due date until the tax is paid. This applies to late payments, payments made with returns filed on extension, and additional amounts assessed through audits. The rate equals the federal underpayment rate under IRC Section 6621 plus 2%, and it fluctuates quarterly as the federal rate changes.11Virginia Department of Taxation. Penalties and Interest
Personal Liability for Officers
Corporate officers, partnership officers, and LLC officers who willfully fail to pay, collect, or account for taxes administered by the Virginia Department of Taxation face personal liability equal to the full amount of tax evaded or not paid over. That liability is assessed and collected the same way the underlying tax would be.12Virginia Code Commission. Virginia Code 58.1-1813 – Liability of Corporate Officers The corporate form does not shield individual officers from willful tax failures.
Criminal Exposure
Willfully failing to file a required income tax return is a Class 1 misdemeanor under Virginia law. Filing a fraudulent return with intent to defraud the Commonwealth is a Class 6 felony.13Virginia Code Commission. Virginia Code 58.1-348 – Criminal Prosecution for Failure or Refusal to File Return These outcomes are reserved for intentional misconduct, not honest mistakes.
Amended Returns After a Federal Change
If the IRS changes a corporation’s federal taxable income after an audit, renegotiation of a government contract, or any other final determination, the corporation must file an amended Virginia return within one year of the final determination date.14Virginia Code Commission. Virginia Code 58.1-311 – Report of Change in Federal Taxable Income The same one-year deadline applies when a corporation voluntarily files an amended federal return. Missing the deadline can cost the corporation the right to claim a refund on an overpayment that results from the federal adjustment. Virginia can also use the federal change to assess additional state tax.