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In order to simplify and improve existing tax measures relating to scientific research and experimental development ("R&D") activities, changes have been introduced to:
The government has announced the creation of a tax credit for R&D, innovation and pre-commercialization (hereinafter referred to as the "CRIC"). This credit applies to an eligible corporation that incurs, in a taxation year, "expenditures relating to R&D activities" or "expenditures relating to pre-commercialization activities". Similar measures also apply to a corporation that is a member of an eligible partnership, allowing such a corporation to benefit from the CRIC on its share of expenditures relating to R&D activities or expenditures relating to pre-commercialization activities. In short, for a corporation or partnership to be "eligible", it must operate a business in Quebec and carry out R&D or pre-commercialization work in Quebec.
The basic rate of this refundable tax credit will be 20%. This rate may increase to 30% for a maximum of $1 million (expenditures limit shared among associated corporations) of expenditures relating to R&D activities or expenditures relating to pre-commercialization activities of an eligible corporation that exceed the amount of the applicable exclusion threshold, regardless of its assets.
In summary, expenditures relating to R&D and pre-commercialization activities will include salaries and wages, considerations paid to subcontractors, payments made to certain research organizations as well as capital expenditures relating to the acquisition of property incurred by an eligible corporation, or an eligible partnership, in respect of these activities. A pre-commercialization activity will include tests, technological validations and studies carried out to satisfy regulatory requirements as well as product design, to the extent that such work constitutes the continuity of R&D activities carried out in Quebec by the eligible corporation or eligible partnership regarding a business of the corporation or partnership.
Capital expenditures relating to R&D or pre-commercialization activities will include any capital expenditure incurred for the acquisition of a property that is used in Quebec, for all or substantially all of its operating time during its expected useful life, for R&D or pre-commercialization activities, as the case may be. However, these expenses do not include land or a building.
The expenses giving rise to the credit will be reduced by the amount of an exclusion threshold for a taxation year corresponding to the greater of $50,000 or a calculation based on the salaries paid to employees in respect of R&D or pre-commercialization work. Briefly, the calculation based on salaries will generally increase the exclusion threshold by an amount equal to the amount taken into account for the calculation of the basic personal tax credit (i.e., $18,571 in 2025) multiplied by the proportion of salary or wages paid to a specific employee for R&D or pre-commercialization work in relation to the total salary or wages paid to that employee. Each additional employee will therefore increase the threshold by up to approximately $18,571. This calculation appears to be intended to encourage higher salaries per employee, as opposed to a large number of lower-salaried employees.
Finally, the amount of any government or non-government assistance and of any benefit or advantage attributable to expenditures relating to R&D activities or to expenditures relating to pre-commercialization activities will have to be deducted from the amount of such expenditures, in accordance with the usual rules, except that an amount received under one of the investment tax credits of the federal tax system will not constitute government assistance for the purposes of the CRIC.
The CRIC will apply in respect of a taxation year, or a financial year, as the case may be, commencing after the day of the budget speech.
As part of the implementation of the CRIC, certain adjustments are required for the application of the following tax measures:
The incentive deduction for the commercialization of innovations in Quebec ("IDCI")
For greater clarity, expenditures relating to pre-commercialization activities will not be taken into account in the calculation of the Québec nexus ratio for the purposes of the IDCI. Similarly, expenditures relating to R&D activities taken into account in the calculation of the Québec nexus ratio will not be reduced by the CRIC exclusion threshold.
These changes will apply to a tax year that will begin after the day of the budget speech.
Deduction for stock-options
The Quebec tax legislation provides for a deduction at the rate of 25% of the amount of the taxable benefit, which may be increased to 50% when the option was issued by a corporation that was a qualified corporation or when the option relates to securities that are part of a class of shares listed on a recognized stock exchange and is granted to an employee of a corporation that is a specified corporation.
For this purpose, an qualified corporation means a corporation that, in the calendar year during which the option is granted (hereafter referred to as the "given year"), carries on a business in Quebec and has an establishment there, if, for its taxation that ended in the calendar year preceding the given year, it had assets of less than $50 million and was granted an amount under one of the former R&D tax credits for its taxation year that ended in the given year or for one of the three preceding taxation years. Under the CRIC, eligibility for the higher rate is not based a criterion relating to the company's assets.
In this context, correlative changes will be made to the deduction for stock options in order to take into account the parameters of the CRIC. The tax legislation will therefore be amended so that a corporation will qualify as a qualified corporation for a calendar year for the purposes of the deduction for stock options if, in the calendar year, it carries on a business in Quebec and has an establishment there, and if an amount in respect of the CRIC was granted to it for its taxation year that ended in the calendar year or if, for one of the three preceding taxation years, either an amount in respect of the CRIC was granted to it, or the corporation had assets shown in its financial statements of less than $50 million and an amount in respect of one of the former R&D tax credits was granted to it.
These changes will apply from calendar year 2026.
As a correlative to the introduction of the CRIC, the following tax credits will be abolished in respect of a taxation year or fiscal period of a taxpayer or partnership, as the case may be, that begins after the day of the budget speech:
Following a review of tax expenditures, the government has determined that certain activities supported by the tax credit for the development of e-business ("TCEB") are no longer considered to be high value-added innovative activities. Accordingly, the government is making changes to the TCEB in order to:
More specifically, for an activity to be considered as incorporating AI functionalities to a significant extent, the tasks performed by the employee will have to be primarily e-business related and relate to a mandate, project or product that incorporates AI functionalities in a significant way.
In addition, the "50% test" of the criterion relating to activities which requires that at least 50% of the company's gross revenues come from activities included in a group described under four specific NAICS codes (i.e., 511210 (software publishers), 541510 (computer systems design and related services), and under certain conditions, 561320 (temporary help services) and 561330 (professional employer organizations)) is amended to include data processing, data hosting and related services activities included in the group described under NAICS code 51821.
Consequently, the activities included in the group described under NAICS code 51821 will also be considered under the criterion relating to services provided, which requires that at least 75% of the corporation's gross income from activities covered by the above NAICS codes consist either of services whose ultimate beneficiary is a person or partnership with which the corporation deals at arm's length, or of services relating to an application developed by the corporation that is used exclusively outside Quebec.
Finally, activities relating to the maintenance or evolution of information systems or technological infrastructures will no longer be eligible activities.
These changes will apply, for the refundable tax credit and the non-refundable tax credit, to a taxation year that begins after December 31, 2025. However, there is an election allowing these changes to apply to a taxation year beginning after the day of the budget speech and before January 1, 2026.
It should be noted that the tax legislation will also be amended to reduce the tax assistance provided to corporations that engage in inter-company outsourcing. More specifically, when the proportion of gross income from activities included in the groups described under the above-mentioned NAICS codes attributable to services relating to an application developed by the corporation for use exclusively outside Quebec by an ultimate beneficiary that is a person or partnership not dealing at arm's length with the corporation is at least 50%, the credit rates will then correspond to half the rates otherwise applicable for that taxation year.
These changes will apply, for the refundable tax credit and the non-refundable tax credit, to a taxation year that begins after December 31, 2025.
The government wishes to refocus the tax assistance granted under the refundable tax credit for mining resources in order to better support exploration corporations at the development stage and to encourage corporations to carry out more projects related to critical and strategic minerals, while ensuring a fair distribution of the tax expenditure. These amendments consist in:
More specifically, the development costs that will now be eligible for the tax credit will include the costs incurred to bring a new mine into production in reasonable commercial quantities, including in particular the costs of clearing land, removing surface layers, etc.
This change will apply to development costs incurred after the day of the budget speech.
Next, the tax legislation will be amended to revise the rates of the tax credit relating to resources in respect of eligible expenses related to mining resource so that the tax credit rate is equal to:
* A specified eligible corporation is an eligible corporation that does not operate a mineral resource or an oil or gas well.
** Eligible expenses that are primarily attributable to one or more critical and strategic minerals will qualify for the enhanced rates when incurred and paid before January 1, 2030. Thereafter, these expenses will qualify for the applicable rates for eligible expenses related to other mining resources.
For the purposes of the tax credit relating to resources, critical minerals will mean the following minerals: antimony, bismuth, cadmium, cesium, copper, tin, gallium, indium, tellurium and zinc. Strategic minerals will mean the following minerals: cobalt, rare earth elements, platinum group elements, graphite (natural), lithium, magnesium, nickel, niobium, scandium, tantalum, titanium and vanadium.
This change will apply to eligible expenses incurred after the day of the budget speech.
Finally, a qualified corporation and the other corporations that are members of an associated group will have to share a cumulative limit on eligible expenses of $100 million over five years. Similar rules will also apply to partnerships.
This change will apply to a taxation year of an eligible corporation that begins after the day of the budget speech. Where the expenses are incurred by an eligible partnership, this change will apply to a fiscal period of the partnership that begins after the day of the budget speech. In addition, eligible expenses incurred on or before the day of the budget speech will not be considered for the calculation of the balance of cumulative eligible expense limit of an eligible corporation or eligible partnership.
In the same vein, the government has announced the abolition of the additional deductions of 10% previously granted in respect of certain exploration expenses incurred in Quebec and in respect of certain surface mining exploration expenses incurred in Quebec.
These amendments will apply in respect of flow-through shares issued after the day of the budget speech. However, they will not apply in respect of shares issued after that day but before January 1, 2026, where they are issued pursuant to an application for a preliminary prospectus receipt made on or before the day of the budget speech. Similarly, they will not apply in respect of shares issued after the day of the budget speech, when they are issued following a public announcement made on or before that day, if the report of distribution form has been submitted to the Autorité des marchés financiers on or before May 31, 2025.
Following the government's review of tax expenditures, it appears that tax holidays for certain foreign workers entailed a significant administrative burden and failed to achieve their objectives. These measures will therefore be abolished as of the day after the budget speech.
Consequently, no new application for the issuance of a certificate will be accepted by the Minister of Economy, Innovation and Energy, the Minister of Finance or the Minister of Transport, as the case may be, as of the day following the day of the budget speech. However, these abolitions will not affect the eligibility of individuals in respect of whom a certificate is already held by the eligible employer or for whom an application for the issuance of a certificate has been submitted no later than the day of the budget speech to the Minister concerned. These individuals will be able to benefit from the tax holiday under the current rules.
These abolitions cover the following measures:
In order to ensure more uniform treatment of payments of the refundable tax credit granting an allowance to families ("RTCAF") to bereaved parents, the tax legislation will be amended to provide that payments of the Family Allowance, the supplement for a handicapped child and the supplement for a handicapped child requiring exceptional care, where applicable, will be extended for 12 months from the month following the month that includes the day of an eligible dependent child’s death for whom Family Allowance payments were already in progress at the time of the child's death.
This measure will apply in respect of a death occurring after June 30, 2025.
As of the 2026 taxation year, the age of 16 included in the definition of "eligible child," for the purposes of the tax credit for child care expenses, will be reduced to 14. Consequently, an eligible child of an individual or of the individual's spouse will have to be under 14 years of age at any time during the year in order that child care expenses paid in respect of the child during the year to be eligible for the tax credit for child care expenses for that year. This amendment does not apply to child care expenses for a mentally or physically infirm child dependent on the individual or the individual's spouse, since there is no age limit in such a situation.
The government recognizes a disparity between the Quebec and federal tax systems with respect to the treatment of fees paid to certain practitioners, particularly for the purposes of calculating the tax credit for medical expenses.
The Quebec tax legislation will be amended so that the term "practitioner" provided in the Taxation Act no longer includes homeopaths, naturopaths, osteopaths and phytotherapists.
This measure will apply as of January 1, 2026.
The tax legislation will be amended so that individuals must include, in calculating their income, the value of the benefit received by the individual from his employer after December 31, 2027 in respect of an eligible transit pass, an eligible paratransit pass or the benefit arising from the use of an intermunicipal shared transportation service.
Since 2013, only municipal political contributions have been maintained for the purposes of calculating the tax credit for political contributions. To ensure equity and uniformity in the financing of the various political parties involved on the provincial and municipal levels, this tax credit will be abolished for all contributions made as of the 2026 taxation year.
The Canada Revenue Agency (CRA) already requires Canadian taxpayers to declare on an annual basis the ownership of foreign property whose total cost exceeds $100,000 at any time during the year. Revenu Quebec has now agreed to implement a similar mechanism for obtaining information.
Quebec taxpayers will therefore have a new reporting obligation with respect to foreign property held outside Canada, which will be satisfied by means of a new prescribed form to be completed and filed with Revenu Quebec for a taxation year or fiscal period, as the case may be, taking into account the parameters set out below. These measures will apply as of a date to be determined by the government after the bill giving effect to them is assented to.
Reporting Entity: A person or entity that must file with the Quebec Minister of Revenue a report in respect of the designated foreign property it holds, for a taxation year or a fiscal year, as the case may be, will mean a "designated Quebec entity" whose total of the amounts each representing the cost amount, to the person or entity, of its designated foreign property that exceeds $100,000.
Designated Quebec entity: Designated Quebec entities, for a taxation year or fiscal year, as the case may be, mean individuals and certain trusts resident in Quebec, as well as corporations resident in Canada that have an establishment in Quebec, and certain partnerships.
Designated foreign property: For the purposes of the Quebec tax system, the designated foreign property that will be subject to the new reporting obligations will be essentially the same as that provided for in the federal tax legislation, with the necessary adaptations.
The new form must be filed with Revenu Quebec by a reporting entity, for a taxation year or fiscal period, as the case may be, no later than the same filing due date as that of the tax return applicable to the reporting entity for the year, except in the case of a partnership, in which case the filing due date will be the same as that of the information return (or the one that would be applicable if the partnership were to file one).
Designated Quebec entities qualifying as reporting entities that will be subject to the new requirement to report their designated foreign property and that fail to do so may incur significant penalties.
Quebec's tax legislation will be amended to introduce penalties, notably:
Following the example of federal tax legislation, this new obligation to declare designated foreign property will be accompanied by an additional period of three years following the normal reassessment period applicable to the taxpayer for the year in which the declaration is made.
The tax on insurance premiums applies to most amounts payable to obtain for oneself or another a benefit on the occurrence of a risk. The tax rate is currently 9%, while the rate of the Quebec sales tax is 9.975%.
For the sake of uniformity, the tax rate on insurance premiums will be adjusted by setting it at the same rate as the Quebec sales tax. As a result, the tax on insurance premiums at the rate of 9.975% will apply to insurance premiums paid after December 31, 2026.
Under the fuel tax system, diesel is generally taxable. However, a refund of this tax is available for biodiesel that is not blended with another type of fuel at the time of purchase.
Following the government's review of tax expenditures, it was found that this measure, which was designed to encourage the use of this fuel, is seldom used. As a result, the fuel tax regime will be amended to abolish this refund.
This change will apply to biodiesel acquired after the day of the budget speech.
