Quebec Provincial Budget Tax Updates 2025-2026
Overview
On March 25, 2025, the Quebec’s government has proposed new and changes to provincial tax measures as part of its 2025-2026 budget “For a Strong Québec”. This comprehensive summary highlights some of the key changes that will influence the Quebec tax environment in the coming years.
Corporate Income Tax Measures
There are no proposed changes to corporate income tax rates or the $500,000 small-business limit for 2025.
The corporate income tax rates for Quebec in 2025 are as follows:
| Provincial tax rate | Federal and provincial combined tax rate | |
| Small-business tax rate[1] [2] | 3.20% | 12.20% |
| General corporate tax rate | 11.50% | 26.50% |
Introduction of the New Tax Credit for Research, Innovation, and Commercialization (CRIC)
The 2025-2026 budget abolishes eight research and development (R&D) tax measures and replaces them with the new Tax Credit for Research, Innovation, and Commercialization (CRIC). The CRIC will be fully refundable and will support R&D and pre-commercialization activities for innovation projects carried out in Québec.
To be eligible, pre-commercialization activities must be a continuation of an R&D project conducted in Québec.
Québec’s new innovation tax assistance framework will be more complementary to the federal government’s tax support and aligned with its recent R&D and innovation policies. The CRIC will apply to tax years or fiscal periods starting after March 25, 2025.
| Key Parameters of the CRIC | |||
| Eligible corporations | Rate | Eligible expenses | Exclusion threshold |
| Corporation with an establishment in Québec that carries on a business here | 30% on the first $1 million of eligible expenses exceeding an exclusion threshold. 20% on eligible expenses beyond this $1 million limit. | Expenses related to R&D or pre-commercialization activities, including: – Labour costs (50% of the amount of a contract with arm’s length subcontractors). – Equipment acquisition costs. | The greater of $50,000 or the sum of the exclusion thresholds for each employee, adjusted in proportion to the time spent on eligible R&D and pre-commercialization activities.[3] |
As a result, the Incentive deduction for the commercialization of innovations in Québec (IDCI) will be amended in order to adjust the variables of the fraction considered for the calculation of the Québec nexus ratio of a qualified corporation for the purposes of the IDCI. The securities option deduction will also be subject to consequential amendments to consider the CRIC parameters.
The following research and development (R&D) tax credits will be abolished:
- Tax credit for scientific research and experimental development
- Tax credit for university research and for research carried on by a public research center or a research consortium
- Tax credit for private partnership pre-competitive research
- Tax credit for fees and dues paid to a research consortium
- Tax credit for technological adaptation services
- Tax credit for design (industrial component)
Details on the changes aimed at optimizing Québec’s R&D and innovation support model are presented in the document entitled Innovation to Prosper.
Modernization of the Tax credit for the development of e-business (TCEB)
To encourage higher value-added IT activities and focus tax incentives on the AI-related IT sector, the 2025-2026 budget introduces the Tax Credit for Electronic Business Development Integrating Artificial Intelligence (TCEBAI), replacing the existing Tax credit for the development of e-business (TCEB). The TCEBAI will apply to corporate tax years starting after December 31, 2025.
Eligible corporations
The TCEBAI will be available to IT-specialized companies that:
- Have an establishment in Québec.
- Employ at least six eligible employees; and
- Meet the following gross revenue criteria:
- 75% of gross revenue must be derived from the IT sector.
- 50% of gross revenue must be derived from software development, publishing, data processing, and hosting activities.
- 75% of gross revenue from eligible activities must come from services provided to third parties or applications developed and used exclusively outside Québec.
Eligible activities
Employees must perform the following AI-integrated electronic business activities:
- IT consulting services related to technology, system development, or electronic business processes and solutions, provided it is linked to at least one of the other two eligible activities carried out by the company.
- Development and integration of information systems and technology infrastructures.
- Development of security and identification services.
Eligible expenses
Eligible expenses include labor costs exceeding an exclusion threshold per eligible employee. This threshold corresponds to the basic personal amount under Quebec’s personal income tax system ($18,571 in 2025). Employees must:
- Hold a full-time position; and
- Dedicate at least 75% of their time to eligible activities.
Salaries related to certain government contracts will not be eligible.
Tax credit rates
| Tax credit rates | 2025 | 2026 | 2027 | 2028 et après |
| Refundable Tax Credit | 23 % | 22 % | 21 % | 20 % |
| Non-Refundable Tax Credit | 7 % | 8 % | 9 % | 10 % |
Starting in 2026, these rates will be reduced by half for companies where at least 50% of gross revenue comes from services provided to related entities for applications used exclusively outside Québec.
Refocus of the tax credit relating to resources on critical and strategic minerals (CSMs)
Quebec has been providing generous tax assistance to mining companies for several years, particularly through the tax credit relating to resources. Given the growth of critical and strategic minerals (CSMs), which are essential for the energy and technological transition, the government is planning to update the tax credit relating to resources to encourage their development.
To enable Quebec to develop the potential and business opportunities associated with the valorization of CSMs, the government announces the following changes to the tax credit relating to resources:
- The tax credit rates for expenses related to mining resources, which currently range between 12% and 38.75%, depending on the type of company and the location of the incurred eligible expenses, will be updated as follows:
- 22.5% for companies that do not exploit any mineral resources or operate any oil or gas wells.
- 10% for other types of companies.
- For work related to CSMs, the rates will be doubled until December 31, 2029, reaching 45% or 20%, depending on the case.
- The rates for expenses related to renewable energy and energy savings will remain at 28% and 24%, depending on the type of company.
- The rate for expenses related to other natural resources (dimension stone) will remain at 12%.
- The credit will no longer only cover exploration but will also include expenses related to the development of mineral resources, thereby providing better support for businesses in the post-exploration stage.
- A cumulative ceiling on eligible expenses of $100 million per five-year periods will be introduced to ensure fair distribution of the tax incentives government funds.
The changes to the tax credit relating to resources will apply to expenses incurred after the day of the 2025-2026 budget speech, but the introduction of the $100 million eligible expense cap will apply to tax years beginning after this date.
The critical minerals targeted by this measure include antimony, bismuth, cadmium, cesium, copper, tin, gallium, indium, tellurium, and zinc. The strategic minerals targeted by this measure include cobalt, rare earth elements, platinum group elements, natural graphite, lithium, magnesium, nickel, niobium, scandium, tantalum, titanium, and vanadium.
| Main parameters of the tax credit relating to resources applicable to mining resource expenses | ||
| Before Budget 2025-2026 | After Budget 2025-2026 | |
| Eligible corporations | Corporations with an establishment in Québec, that operate a business there and that have incurred eligible expenses. | |
| Eligible expenses | Exploration expenses incurred in Québec. | Exploration and development expenses incurred in Québec. |
| Assistance ceiling | No ceiling. | $100 million of cumulative eligible expenses over five years. |
| Rate of assistance | For a corporation that does not exploit any mineral resources or operate any oil or gas wells[4]: – 38.75% for expenses related to mining resources in the Plan Nord territory – 28% for expenses related to mining resources elsewhere in Québec For other corporations: – 18.75% for expenses related to mining resources in the Plan Nord territory – 12% for expenses related to mining resources elsewhere in Québec | For a corporation that does not exploit any mineral resources or operate any oil or gas wells[5]: – 45%[6] for expenses related to a project dedicated to CSMs – 22.5% for expenses related to a project not dedicated to CSMs For other corporations: – 20%[7] for expenses related to a project dedicated to CSMs – 10% for expenses related to a project not dedicated to CSMs |
Consequential adjustments to the flow-through share regime
The 2025-2026 Budget announces a revision of the flow-through share regime, eliminating additional deductions. These changes will align Québec’s regime with the federal system and will apply to flow-through shares issued after March 25, 2025.
| Key Parameters of the Flow-Through share regime | ||
| Before the 2025-2026 Budget | After the 2025-2026 Budget | |
| Form of assistance | Income deduction for taxpayers (individuals or corporations) acquiring flow-through shares. | |
| Eligible expenses | Exploration and development expenses in Canada. | |
| Deduction rate | Basic deduction: – Exploration expenses: 100 % – Development expenses: 30% declining balance Additional deductions for exploration expenses (available only to individuals): – Mining exploration expenses incurred in Québec by a corporation that does not exploit any mineral resources: 10% – Surface mining exploration expenses incurred in Québec by a corporation that does not exploit any mineral resources: 10% Maximum deduction: 120% | – Exploration expenses: 100 % – Development expenses: 30 % declining balance |
To further harmonize Québec’s tax treatment with the federal legislation, the 2025-2026 Budget also eliminates the additional capital gains exemption for certain resource properties for flow-through share dispositions occurring after March 25, 2025.
Extension of accelerated depreciation measures
As part of its Fall 2024 Economic Statement, the federal government announced the extension of accelerated depreciation measures for an additional five years starting January 1, 2025, with a four-year phase-out period after 2029. Due to the prorogation of the Canadian Parliament, the extension of these measures has not yet come into effect.
In Québec budget 2025-2026, the government is confirming its intention to harmonize with the federal government’s announcement. As a result, the 100% depreciation rate in the year of acquisition would be reinstated until 2029 for:
— manufacturing and processing machinery and equipment.
— clean energy generation equipment.
— zero-emission vehicles.
Additionally, all other types of investments that do not qualify for the 100% depreciation rate increase could be deducted up to three times the usual first-year deduction amount.
Extension of the tax credit for the digital transformation of print media
The budget extends the tax credit supporting the digital transformation of print news media companies for one additional year, until December 31, 2025.
Abolition of certain tax measures for businesses
Following the review of tax expenditures announced in the 2024-2025 budget, the government is proposing to abolish certain measures in its 2025-2026 budget namely:
- The additional 100% deduction in the calculation of employer income for public transit expenses, which benefits only about a hundred companies, largely due to the rise of remote work. This measure will expire on December 31, 2027.
- The tax exemption on benefits granted to employees who receive public transit passes from their employer. This measure will also expire on December 31, 2027.
- The tax credit to foster synergy between Québec businesses, which allowed companies investing in an eligible SME to receive a non-refundable tax credit equal to 30% of the value of their investment in eligible shares. This measure will be abolished immediately following the budget speech.
Personal Income Tax Measures
There are no proposed changes to personal income tax rates for 2025.
The income tax rates for the 2025 taxation year, based on your taxable income, are as follows:
| Taxable income | Rate |
| $53,255 or less | 14.00% |
| More than $53,255 but not more than $106,495 | 19.00% |
| More than $106,495 but not more than $129,590 | 24.00% |
| More than $129,590 | 25.75% |
The current combined personal income tax rates for the top marginal bracket in 2025 are detailed below :
| Taxable income exceeding $253,414 | Rate |
| Interest/regular income | 53.31% |
| Capital gains | 26.65% |
| Eligible dividends | 40.11% |
| Non eligible dividends | 48.70% |
Enhancement of the Family Allowance for bereaved parents
The budget announces an extension of Family Allowance payments for 12 months following the death of an eligible child under the age of 18, effective July 1, 2025. This extension will also apply to amounts granted to parents of children eligible for the Supplement for Handicapped Children and the Supplement for Handicapped Children Requiring Exceptional Care.
Reduction of the Maximum Age from 16 to 14 for the refundable tax credit for childcare expenses
Starting in 2026, the age criterion for an eligible child under the refundable childcare expenses tax credit will be reduced from under 16 years old to under 14 years old. Children who are dependents due to a severe and prolonged impairment in mental or physical functions will not be affected by this change.
Exclusion of certain practitioners from the tax credits for medical expenses
As of 2026, only medical expenses paid to healthcare professionals who are members of a professional order in Quebec will be eligible for medical expenses tax credits. This measure, aligned with the federal credit, excludes alternative medicine services (homeopaths, osteopaths, naturopaths and phytotherapists). However, osteopaths could be recognized once their professional order is established, as steps are underway in this regard.
Criteria for recognized institutions for the tax credit for tuition and examination fees
Starting in 2026, new designation and exclusion criteria will be introduced to allow Revenu Québec to better regulate the recognition process for institutions qualifying for the tax credit. This measure aims to prevent the recognition of institutions offering training that does not necessarily lead to employment and to avoid granting tax benefits to individuals attending such institutions.
Adjustment of tax assistance to the cooperative sector
The Cooperative Investment Plan (CIP) provides a tax advantage to members and workers of cooperatives by allowing them to deduct 125% of the cost of acquiring qualifying securities. However, given the existence of other support mechanisms for cooperative capitalization, the need for a deduction exceeding 100% has diminished. Thus, as part of the 2025-2026 budget, the government announces that the deduction rate will be reduced from 125% to 100% for securities acquired after the budget speech.
Conversion of certain deductions into tax credits
Starting in 2026, two deductions will be converted into non-refundable tax credits at a base rate of 14%:
- The religious residence deduction, aimed at reducing the taxable benefit associated with employer-provided housing for hosting the faithful.
- The deduction for assistance received for the payment of tuition fees for adult basic education programs, aligning it with other student tax benefits, which are generally in the form of non-refundable tax credits, such as the tuition and examination fees tax credit.
Abolishing certain tax measures for individuals
Following the review of tax expenditures announced in the 2024-2025 budget, the 2025-2026 budget announces the elimination of certain measures deemed obsolete or underutilized to simplify the tax system:
- Tax shield (as of January 1, 2026): This tax credit, designed to offset the reduction of certain benefits when income increases, will be eliminated due to its complexity and limited impact.
- Tax credit for political contributions to municipal political parties (as of January 1, 2026): This measure will be abolished to standardize the tax treatment of political donations.
- Deduction for the purchase of an income-averaging annuity for Artists (as of January 1, 2026): This deduction is rarely used, with fewer than 10 annuities purchased per year.
- Tax credit for patronage gift: Immediately abolished, but donation agreements made prior to this date will be honoured for their remaining period. To compensate, the Mécénat Placement Culture program will receive an additional $1 million per year.
- Tax holidays for:
- foreign researchers
- foreign experts
- foreign specialists working in the financial services sector
- foreign specialists assigned to operations of an international financial centre
- seamen engaged in international transportation of freight
These tax holidays will be abolished after the budget speech date, except for those already certified, who will retain their benefit for the remainder of their five-year period. Consequently, no new certificate applications will be accepted as of March 26, 2025.
Indirect tax measures
Harmonization of the rate of the tax on insurance premiums with that of the Québec sales tax
The current 9% tax rate applicable on insurance premiums will be set at the same rate as the Québec sales tax. As a result, the 9.975% tax rate will apply to insurance premiums paid after December 31, 2026.
Abolition of the fuel tax refund for biodiesel
Abolition of the Fuel Tax Rebate for biodiesel.
Other tax measures
Strengthening tax compliance regarding foreign assets held by Québec residents
The Québec government will introduce tax changes to enhance compliance concerning foreign assets held by Québec taxpayers. Starting in 2025, a new reporting requirement will be imposed on Québec residents having assets outside Canada, through a Québec-specific form similar to the federal T1135 form.
The foreign assets subject to reporting will generally align with those already defined in federal tax legislation. However, the reporting of foreign affiliates, which is required through the T1134 form at the federal level, is not included in this new measure.
The new prescribed Québec form must be filed no later than the due date for filing the income tax return for the year or the partnership information return.
In addition, penalties equivalent to those under the federal tax system will be introduced, namely:
- A penalty for failing to file of $500 per month, up to a maximum of 24 months (i.e., a cap of $12,000). This amount is doubled for any entity that has received a formal notice to file the return and has failed to comply within the prescribed timeframe.
- An additional penalty for failing to file beyond 24 months, amounting to 5% of the total cost of designated foreign assets.
- A penalty for a false statement or omission, equal to the greater of $24,000 or 5% of the total cost of designated foreign assets.
No effective date has been specified for this new obligation.
Harmonization with Capital Gains measures
To ensure consistency with the federal tax system, Quebec will align with the announced changes regarding capital gains. As of January 1, 2026, the inclusion rate will increase from 50% to 66.7%:
- On the portion of capital gains exceeding $250,000 for individuals.
- On the entirety of capital gains for corporations and trusts.
Simultaneously, the reduction of the stock option deduction rate will come into effect on the same date.
However, it is important to note that on March 21, 2025, the Prime Minister of Canada Mark Carney announced the government’s intention to cancel the proposed increase in the capital gains inclusion rate.
Measures for Electric Vehicles
Relaunching the “Roulez vert” program on April 1, 2025
As part of the 2025-2026 budget, the government of Quebec confirms the reopening of the “Roulez vert” program starting on April 1, 2025, for the purchase of electric vehicles. The maximum rebates for the purchase of electric vehicles will be as follows:
New Vehicles (under $65,000):
- $4,000 for fully electric or fuel cell vehicles.
- $2,000 for plug-in hybrid vehicles.
Used Vehicles:
- $2,000 for fully electric vehicles.
- $1,000 for electric motorcycles
Rebates will be gradually reduced and will cease completely for vehicles registered after January 1, 2027.
Introduction of an annual contribution for electric and plug-in hybrid vehicles
The specific tax on fuel is the primary source of funding for the Land Transportation Network Fund (LTNF).
Currently, motorists fund the road and public transport network through this tax and registration fees, but drivers of electric or plug-in hybrid vehicles contribute less while benefiting from the same services.
Starting January 1, 2027, an annual contribution of $125 for electric vehicles and $62.50 for plug-in hybrids vehicles will be introduced. This measure, which will be in addition to registration fees, will be indexed annually and is expected to generate more than $150 million per year by 2030, earmarked for the LTNF.
Ending free access to toll bridges and ferries for electric and plug-in hybrid vehicles
The government announces that it will not extend the free access to toll bridges and ferries for vehicles with a green license plate beyond March 31, 2027. The rapid growth in the number of electric and plug-in hybrid vehicles in circulation in Quebec, observed since 2023, indicates that this measure is no longer necessary.
Gradual restoration of the balance between the property tax and the public utilities tax (PUT)
The 2025-2026 budget provides for a gradual increase in the PUT[8] rates starting in 2027, reaching a uniform rate of 1.5% by 2035, aligned with the lowest property tax rate currently levied by Québec municipalities. However, electricity transmission and distribution assets will maintain their current rates to prevent an increase in electricity prices.
Municipalities and their wholly owned entities are exempt from the PUT unless they operate a network with private partners. The 2025-2026 budget extends this exemption to Indigenous communities and, starting in 2025, introduces a proportional PUT rebate for municipalities and Indigenous communities holding shares in a network operated with third parties.
Update of the additional registration fee for luxury vehicles
Due to the rise in vehicle prices, the government will increase the luxury vehicle registration surcharge threshold from $40,000 to $62,500. The exemption for electric and plug-in hybrid vehicles will be eliminated. These changes will apply to fees payable after December 31, 2026.
Revision of the land register consultation fee
The consultation fee for the land register is currently set at $1 per document, a rate in place since 2002. To generate additional revenue for the Territorial Information Fund, this fee will increase to $1.50 per document starting April 1, 2026. Subsequently, as is the case with many other fees, it will be indexed based on inflation
End of indexation for eligibility threshold for reduced employer contribution rates to the Health Services Fund (HSF)
As part of the 2025-2026 budget, the government announces the end of the indexation of the payroll threshold that qualifies for reduced employer contribution rates to the Health Services Fund (HSF). This threshold will remain fixed at $7.8 million.
Changes to various parameters of Capital regional et coopératif Desjardins
Capital régional et coopératif Desjardins (CRCD) was established in 2001 to invest in eligible Québec entities and support regional and cooperative sector projects. The government facilitates its mission through a non-refundable tax credit of 30% for individuals purchasing CRCD shares, with a maximum annual investment of $5,000. Legislative amendments will introduce:
- a temporary annual capitalization limit until 2030.
- a $45,000 cumulative subscription cap per shareholder. and
- a new class of shares (Class C) with a 14-year maximum holding period and a 25% tax credit.
For more information, visit Budget 2025-2026 – For a Stong Québec.
[1] Applies to the first $500,000 of active taxable income of Canadian-Controlled Private Corporations (CCPCs).
[2] The Quebec small business deduction is available to companies whose employees have worked at least 5,500 paid hours during the taxation year. The deduction is progressively reduced for businesses having between 5,000 and 5,500 paid hours and is eliminated if paid hours fall below 5,000. However, some corporations in the primary or manufacturing sectors may not subject to this requirement.
[3] The exclusion threshold amount for an employee corresponds to the basic personal amount under the personal income tax system (e.g., $18,571 in 2025), adjusted in proportion to the time spent on eligible R&D and pre-commercialization activities.
[4] This company must not be a member of an associated group in which one of the members operates a mineral resource or an oil or gas well.
[5] Id.
[6] This rate will be applicable until December 31, 2029.
[7] Id.
[8] Businesses operating an electricity, gas, or telecommunications network are subject to the public utilities tax (PUT), which serves as a substitute for property tax by applying to assets that are not included in the municipal property assessment roll.
