Texas Corporate Tax - Guide for international expansion to the US

Are you considering expanding your business operations into Texas? Understanding the state's corporate tax landscape is crucial for any company looking to establish a presence there.

This guide will provide a clear overview of corporate taxes in Texas, helping you navigate the requirements from initial setup to ongoing compliance. And if you're managing international transactions, a Wise Business account can help you handle cross-border payments efficiently.

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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Texas Corporate tax rate in 2025

The primary corporate tax in Texas is known as the Franchise Tax, which is a privilege tax imposed on entities formed or doing business in the state¹. For the 2024 and 2025 tax years, the "No Tax Due Threshold" is $2,470,000, meaning businesses with total revenue below this amount are not required to pay the tax. The tax rate for retail or wholesale businesses is 0.375% of taxable margin, while other businesses face a rate of 0.75%¹.

The Franchise Tax is levied on a company’s taxable margin. The compensation deduction limit for 2024 and 2025 is $450,000. Additionally, for businesses with total revenue up to $20 million, there's an "EZ Computation Rate" of 0.331%¹.

How to pay corporate tax in Texas

For most businesses in Texas, the state's Comptroller of Public Accounts requires electronic filing and payment of the Franchise Tax through their online systems, such as Webfile or TEXNET². Webfile allows you to file your return and schedule electronic check payments in advance³. TEXNET is mandatory for taxpayers who paid $500,000 or more for any specific tax in the preceding state fiscal year.³

Payment deadlines can vary, but generally, payments scheduled through Webfile must be made by 8:00 p.m. Central Time on the due date for electronic checks to be considered timely. For TEXNET ACH Debit payments, those of $1,000,000 or less must be scheduled by 10:00 a.m. CT on the due date, while payments over $1,000,000 need to be initiated by 8:00 p.m. CT the business day before the due date.⁴

Late payments can incur penalties and interest. A $50 penalty is assessed for each report filed after the due date. If the tax is paid 1-30 days late, a 5% penalty is assessed, increasing to 10% if paid over 30 days late. Interest begins accruing 61 days after the due date¹. Additionally, if you are required to report electronically and fail to do so, there's an extra 5% penalty³.

Let's consider an example for the Texas Franchise Tax. Suppose your company has an annual turnover of $1.5 million. Since this is below the "No Tax Due Threshold" of $2,470,000 for 2025, your company would likely owe no Texas Franchise Tax for the year, provided it meets the other criteria for "No Tax Due" reporting¹.

However, it's crucial to remember that this example only considers the Texas Franchise Tax and does not account for federal income taxes or other state/local taxes that may apply to your business.

When expanding internationally, having efficient financial tools is key. A Wise Business account can be an excellent solution for managing your finances in Texas. It allows you to hold and manage USD, making it simple to pay your Texas corporate tax and other local expenses in the required currency, often at better exchange rates and with lower fees than traditional banks. This can help streamline your cross-border operations and ensure you meet your tax obligations effectively.

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Tax Compliance in Texas

Compliance with Texas tax regulations is essential for avoiding penalties and keeping your business in good standing. After incorporation:

• Register for federal taxes with the Internal Revenue Service (IRS)
• Complete state tax registration through the Texas Comptroller of Public Accounts (CPA).

Common obligations include franchise tax, sales and use tax (SUTA), and federal employment taxes. Every Texas LLC must also designate a professional registered agent with a physical address in the state. This ensures legal documents and tax notices are received promptly. It’s an important safeguard when working with a tax corporate lawyer or using corporate tax outsourcing services.

Annual reports are due to the Texas Secretary of State by May 15 each year. The filing fee is just $1.75⁵, but missing the deadline may lead to loss of good standing and potential late corporate tax filing penalty exposure.

Businesses should also monitor relevant types of corporate tax and be aware of how the Texas corporate tax structure interacts with the US corporate tax rate. While Texas does not levy a traditional corporate income tax, the franchise tax functions similarly in determining your state-level obligations.

Many companies rely on a corporate tax assistant, legal counsel, or specialist firm to stay current with changes and maintain full compliance year-round.

International expansion to Texas

Texas offers a lucrative environment for businesses looking to expand internationally, thanks to its colossal $2 trillion economy. This makes it the world’s ninth-largest economy if it stood alone, with sustained growth reflected in a 4.8% real GDP increase in 2024, which outpaced the U.S. average⁶.

A combination of pro-growth regulations, a skilled workforce of 15.7 million, and a strong entrepreneurial ecosystem fuels this success. Texas has ranked #1 in U.S. exports for 23 consecutive years and has welcomed more corporate relocations than any other state. About 314 headquarters have been established here since 2015. The state also supports 3.3 million small businesses, with a record 500,000 new applications in 2024. Education and talent pipelines are equally robust, with 370,000 higher-education graduates entering the economy in 2023 and more than 4 million Texans participating in upskilling programs annually⁶.

From a logistics standpoint, Texas is hard to beat. Its 380+ airports, 11 deep-water ports, and extensive rail networks give companies direct access to major U.S. and international markets⁷.

The corporate tax meaning here is particularly attractive: Texas imposes no corporate or personal income tax, instead levying a modest franchise tax: 0.375% for retail/wholesale and 0.75% for other businesses⁸. Such a business-friendly climate keeps the tax burden low. It presents an appealing base for companies working with corporate tax lawyers, tax advisors, and corporate tax managers. They can experience streamlined corporate tax filing and benefit from tailored corporate tax advisory services.

The steps to set up a business in Texas are¹⁰:

• Write a clear business plan defining purpose, structure, financing, and advantages.
• Choose your business location based on talent needs and supply chain.
• Create a distinctive name and check for patents.
• Register with the Texas Secretary of State.
• Register for taxation with the IRS and the Texas Comptroller of Public Accounts.
• Apply for any required licenses.
• Maintain strong record-keeping systems.

For a complete step-by-step on forming an LLC in Texas, including costs, naming rules, and filing requirements, see Wise’sHow to Form an LLC in Texas | 2025 Guide.

Incorporation of Business in Texas

Setting up a business in Texas is straightforward, supported by clear legal structures and streamlined filing systems. Businesses of all sizes benefit from knowing the requirements to operate smoothly and maintain corporate tax compliance services.

To incorporate a company in Texas, you will need:

• Business Name: Texas law requires that your chosen name be distinguishable from other registered entities in the state. Availability can be checked through the Texas Secretary of State’s database.
• Registered Agent: Every Texas LLC must have a registered agent with a physical address in Texas to receive legal notices and official correspondence.
• Certificate of Formation (Form 205): This document, filed with the Texas Secretary of State, formally establishes your LLC. It includes:

The LLC’s legal name
Business purpose
Duration (perpetual or specified term)
Registered agent information

• Operating Agreement: An internal document acting as your company’s constitution, defining ownership, management, and operational procedures.
• Employer Identification Number (EIN): Required for corporate tax US filings, opening a bank account, and hiring employees.
• Licenses and Permits: Certain industries require specific approvals from the Texas Department of Licensing and Regulation (TDLR).

As per the Texas Secretary of State, the primary entity types operational in Texas are⁹:

• General Partnership: Formed when two or more people run a business for profit. There is no state filing requirement, though a written partnership agreement is recommended.
• Corporation: Created by filing a certificate of formation with the Secretary of State via SOSDirect. Shareholders own the company, while directors manage its operations.
• Limited Liability Company (LLC): Formed by filing a certificate of formation with the Secretary of State. Members enjoy liability protection limited to their investment.

Choosing the proper structure requires assessing legal obligations, corporate tax differences by state, and operational needs. Texas does not levy a state corporate income tax, but businesses must meet franchise tax obligations. Remember, you can always seek help from a corporate tax assistant, legal counsel, or specialist firm to stay current with changes and maintain full compliance year-round.

International corporate tax best practices

Navigating international corporate tax can be complex, but implementing strategic practices can ensure compliance, optimise your financial position, and reduce tax burdens.

• Stay compliant with local and international tax laws
  It's vital to complete the legal registration process in every country where your business operates. Always file all required tax returns on time to avoid penalties, and make sure you stay updated with local tax laws to remain fully compliant. Beyond national regulations, companies should also understand and adhere to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD). Frameworks such as Base Erosion and Profit Shifting (BEPS) and Pillar Two Global Minimum Tax aim to enhance transparency, prevent tax avoidance, and reduce legal risks.

• Leverage double taxation treaties (DTTs)
  Double Taxation Treaties are crucial for ensuring that your company isn't taxed on the same income twice. Therefore, CFOs and Directors should have a clear understanding of these treaties between the countries where your business operates and how they can potentially relieve your tax burden.

• Maintain up-to-date and transparent financial records
  Keeping clear and organised financial records is essential for preparing accurate tax returns, which helps in reducing the risk of errors that could lead to penalties. Furthermore, well-organised financial records can significantly simplify the process during any financial audits that your company might undergo.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Texas efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.
• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.
• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.
• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.
• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Texas

Who is liable for corporate tax in Texas?

In Texas, the corporate tax is known as the Franchise Tax. Any taxable entity formed or organised in Texas, or doing business in Texas, is liable for this tax. This includes corporations, limited liability companies (LLCs), partnerships, and other legal entities.

Are there any tax incentives for businesses in Texas?

Yes, Texas has several tax incentives and programs to attract and retain businesses, complementing its lack of a corporate or personal income tax. The state offers sales and use tax exemptions for manufacturers on machinery, equipment, and even electricity used in the production process, and similar exemptions are available for R&D companies and data centers. Additionally, businesses can earn franchise tax credits for R&D activities. Texas also uses strategic economic development funds, such as the Texas Enterprise Fund (TEF), which provides "deal-closing" grants to companies considering a move to Texas, and the Texas Enterprise Zone Program (EZP), which offers sales tax refunds to businesses that invest in economically distressed areas. Furthermore, local governments can provide property tax abatements for new projects and school districts can offer property tax limits for major capital investments through programs like the Texas Economic Development Act.

What is the tax treatment of dividends in Texas?

Texas imposes a Franchise Tax on the taxable margin of a business, not directly on dividends received or paid by corporations. However, dividends can factor into a company's total revenue, which is a component in calculating the taxable margin for the Franchise Tax. Federal tax laws govern the tax treatment of dividends at the federal level.

What is the process for registering for corporate tax in Texas?

To register for corporate tax (Franchise Tax) in Texas, entities generally need to establish their business with the Texas Secretary of State. Once registered, the Texas Comptroller of Public Accounts will provide the necessary account information and access to online filing systems like Webfile, which is used for filing reports and making payments.

What are the common pitfalls to avoid regarding corporate tax in Texas?

Common pitfalls to avoid when dealing with corporate tax in Texas include failing to file reports on time, making late tax payments, and not using the required electronic filing methods. These actions can lead to penalties and interest charges. Additionally, businesses should ensure they accurately calculate their taxable margin and understand the various thresholds and rates to avoid underpayment or overpayment of the Franchise Tax.

Sources used in this article:

1. Franchise Tax
2. Electronic Reporting and Paying
3. File and Pay Taxes
4. TEXNET FAQ
5. Bizee - Texas LLC
6. Texas Economic Strength
7. Relocate Your Business to Texas
8. Texas Taxes and Incentives
9. Business Structures in Texas
10. How to incorporate as business in Texas

Sources last checked 21/08/2025