2025 Quebec Budget Highlights

Quebec Minister of Finance Eric Girard tabled the province’s 2025 budget on Tuesday, March 25, 2025. This year’s budget, titled For a Strong Québec, is focused on investments to help Quebecers build a strong economy that will deliver quality public services, primarily in health and education. It also includes measures to help businesses focus on their ability to innovate through an updated tax assistance system.

Business tax measures

Implementing a new tax assistance system fostering scientific research and experimental development (R&D) activities

The budget introduces significant changes to the Quebec development R&D activities tax credit.

The budget proposes to replace several refundable R&D tax credits and introduce a new refundable tax credit for R&D, innovation, and pre-commercialization (CRIC). The new regime intends to provide a higher basic tax credit rate and a more accessible increased rate and maximize R&D investment by making certain capital expenditures eligible.

The budget documents are comprehensive in their details regarding the new framework and eligibility requirements under this new refundable tax credit. A high-level summary of the key measures included in the budget announcement is provided below. We will provide a detailed analysis of the changes and the impact on Quebec businesses in a forthcoming tax alert.

Eligible corporations

Generally, a corporation (other than an excluded corporation) that carries on business in Quebec through an establishment may be able to benefit from CRIC on eligible R&D expenditures. A corporation that is a member of an eligible partnership may also benefit, under certain conditions, from the CRIC on its share of expenditures relating to R&D activities or pre-commercialization activities incurred by the eligible partnership in a fiscal period.

Calculating the tax credit

The basic rate of the new refundable tax credit will be 20 percent for eligible expenditures over a $1 million limit. The rate may be increased to 30 percent for the first of $1 million (the expenditure limit) of an eligible corporation’s expenditures relating to R&D activities or pre-commercialization activities over the applicable exclusion threshold (see below), regardless of its assets. The $1 million expenditure limit will be shared between the taxpayer’s associated group.

Eligible expenditures under the new CRIC tax credit will be subject to a minimum exclusion threshold of $50,000 for an eligible corporation or eligible partnership. This threshold will be prorated where an eligible corporation or an eligible partnership is entitled to more than one tax credit.

Eligible expenditures

Very generally, eligible expenditures will include salaries/wages and equipment expenses related to R&D or pre-commercialization activities — and 50 percent of the amount of a subcontract entered into with a university, public research centre, or research consortium.

The budget introduces several novel concepts and definitions under the new refundable CRIC tax credit, such as:

• expenditures relating to R&D activities and pre-commercialization activities,
• eligible corporation,
• excluded corporation, and
• eligible partnership.

The budget also proposes to make certain capital expenditures eligible for the CRIC. However, a capital expenditure to acquire property used in R&D will be deemed to have not been incurred before the property is considered available for use.

The CRIC tax credit will apply to a taxation year beginning after March 25, 2025, and the following tax credits will be abolished:

• Tax credit for scientific research and experimental development
• Tax credit for university research and research carried on by a public research centre or research consortium
• Tax credit for private partnership pre-competitive research
• Tax credit for fees and dues paid to research consortium
• Tax credit for technological adaption services, and
• Tax credit for design (industrial component)

Incentive deduction for the commercialization of innovations in Quebec (IDCI)

The budget introduces consequential adjustments to the Incentive deduction for the commercialization of innovations in Quebec (IDCI), originally introduced in the 2020 budget. As a result of the implementation of the CRIC and the abolition of various R&D credits, changes will be made to adjust the variables considered for the calculation of the Quebec nexus ratio of a qualified corporation for the IDCI.

Generally, expenditures relating to pre-commercialization activities will not be considered when calculating the Quebec nexus ratio for the CRIC. Similarly, expenditures relating to R&D activities considered in the calculation of the Quebec nexus ratio will not be reduced by the CRIC exclusion threshold.

These changes apply to a taxation year beginning after March 25, 2025.

Stock options deduction

Quebec generally provides a 25 percent stock options deduction, which can be increased to 50 percent where issued by a qualified corporation. The budget proposes consequential amendments to the stock options deduction to consider the new CRIC parameters.

Specifically, a corporation will qualify as a qualified corporation for security options deduction purposes if it carries on a business and has an establishment in Quebec and an amount under CRIC was allocated to it, subject to conditions. This change will apply as of the 2026 taxation year. However, a corporation may be considered a qualified corporation in 2025 if it meets certain conditions.

Tax credits for the development of e-businesses

The budget introduces changes to the refundable and non-refundable tax credits for the development of e-businesses, renaming the two e-business credits as:

• refundable tax credit for the development of e-business integrating artificial intelligence, and
• non-refundable tax credit for the development of e-business integrating artificial intelligence.

The budget proposes to modernize the activities eligible for these credits through the following amendments to the Sectoral Act^[i]:

• An eligible activity must be primarily related to e-business integrating artificial intelligence (AI) functionalities to a significant extent. Specifically, the duties performed by the employee are primarily related to e-business and relate to a mandate, project, or product that integrates AI functionalities to a significant extent.
• Data processing, hosting, and related service activities will be added to the criteria of eligible activities. These will also be eligible activities considered in the services provided for corporation certificate purposes.
• Removing activities relating to the maintenance or evolution of information systems or technology infrastructures from eligible activities for employee certificate purposes.

These proposed changes will apply to the refundable and non-refundable tax credits for taxation years beginning after December 31, 2025. These changes may also apply where the corporation files a timely election in writing with Investissement Québec for a taxation year that begins after March 25, 2025 and before January 1, 2026.

The budget further proposes to reduce the tax assistance provided to corporations that carry out intercompany outsourcing, effective for taxation years beginning after December 31, 2025.

Refundable tax credit relating to mining or other resources

The budget introduces changes to the tax credit relating to mining or other resources to increase support for exploration corporations at the development stage and encourage more projects related to critical and strategic minerals. These changes will include:

• Eligibility for development expenses relating to mining resources incurred by a corporation or partnership in Quebec after March 25, 2025.
• Tax credit rates applicable to the eligible expenses related to mining resources are revised to 22.5 percent for expenses incurred by a specified qualified corporation and to 10 percent for expenses incurred by other qualified corporations.
  • These credit rates will apply in respect of eligible expenses related to mining resources incurred in Quebec, regardless of the region where the eligible expenses are incurred by the corporation or partnership, effective for eligible expenses incurred after March 25, 2025;
• Temporarily enhancing the rates of the tax credit applicable to projects related to critical and strategic minerals to 45 percent in respect of expenses incurred by a specified qualified corporation and to 20 percent in respect of expenses incurred by other qualified corporations. The enhanced rates will apply to eligible expenses incurred and paid after March 25, 2026, but before January 1, 2030;
• Introducing a limit on eligible expenses of $100 million per five-year period. The limit is to be shared between the members of the associated group. This change will apply to the taxation year of an eligible corporation that begins after March 25, 2025.

Health services fund employer contribution

Currently, the contribution payable for a year to the Health Services Fund (HSF) is calculated using a rate of 4.26 percent. This contribution rate is reduced when the employer is a specified employer for the year and its total payroll is below the total payroll threshold applicable for the year, which is $7.8 million for 2025.

The budget proposes to withdraw the automatic indexation of the total payroll threshold for the year for the purposes of calculating contributions to the HSF. As a result, the threshold will remain at $7.8 million for 2026.

Changes to other tax credits

The budget announced changes to several tax credits and incentives currently available to businesses, specifically with the intent to:

• Abolish the additional deduction in respect of certain exploration expenses and the additional deduction in respect of certain surface mining exploration expenses incurred in Quebec under the flow-through share regime. This change will apply to flow-through shares issued after March 25, 2025.
• Abolish the additional capital gains exemption in respect of certain resource properties. This change will apply to dispositions made after March 25, 2025.
• Extend the tax credit for the digital transformation of print media to December 31, 2025 (from December 31, 2024). To be considered a qualified property, the property must be acquired before January 1, 2025 (from January 1, 2024).
• Abolish the tax credit to foster synergy between Quebec businesses. Specifically, Investissement Québec will not accept any new applications for the issuance of an investment certificate for the tax credit to foster synergy as of March 26, 2025.
• Introduce a December 31, 2027, due date for additional deductions for public transit and shared transportation. Accordingly, no amount may be deducted by the employer under these two deductions relating to public transit passes or shared transportation paid after December 31, 2027. And any value of benefit received after December 31, 2027, in respect of an eligible transit pass, an eligible paratransit pass should be included in the employee’s income.

Personal tax measures

Tax compliance with respect to foreign property held by Quebecers

Canadian taxpayers report annually any foreign property with a total cost exceeding $100,000 at any time during the year by filing the federal form T1135. Revenu Québec generally uses an information exchange mechanism with the Canada Revenue Agency (CRA) to obtain relevant information on foreign property held outside of Canada.

The budget introduces a new reporting requirement for Quebec taxpayers in respect of foreign property held outside Canada to be filed with Revenu Québec. The Quebec form will be similar to the federal form T1135 with certain adaptations and will be due on or before the filing due date of the reporting entity. The budget clarified that the requirements for filing a form equivalent to the federal T1134 and for reporting information on foreign affiliates are not part of this announcement.

A reporting entity generally would include a designated Quebec entity whose total of all amounts of designated foreign property exceeds $100,000 at any time during the taxation year. A designated Quebec entity will mean:

• an individual resident in Quebec,
• a corporation that simultaneously resides in Canada and has an establishment in Quebec,
• a trust that is a resident in Quebec,
• a partnership where the partners’ share of the income or loss is less than 90 percent of the partnership’s income or loss for the fiscal period.

The budget introduces new penalties applicable to designated Quebec entities qualifying as reporting entities and that fail to comply with the reporting requirements. There will be a penalty for failing to file the new Quebec form of $500 per month or part of a month for a maximum of 24 months (or $12,000). The penalty may be doubled if the entity has been given formal notice to file the new return and has failed to meet the deadline. An additional penalty of five percent will apply for failure to file for more than 24 months, as well as a maximum penalty of five percent of the cost of the designated property for false statements or omissions. The budget further extends the period of assessment and reassessment in order to enable Revenu Québec to administer this new reporting requirement.

These measures will be effective as of a date to be determined after assent of the bill giving effect to them.

Changes to other tax credits

The budget announced changes to several tax credits and incentives currently available to individuals, specifically with the intent to:

• Enhance the family allowance for bereaved parents
• Change the age requirement for eligibility for the refundable tax credit for childcare expenses to 14 years (from 16 years) as of the 2026 taxation year.
• Changing the term “practitioner” for the purpose of the province’s tax credit for medical expenses. The term “practitioner” will no longer include homeopaths, naturopaths, osteopaths and phytotherapists, effective January 1, 2026.
• Introduce new designation criteria for recognizing educational institutions that may issue tuition receipts granting entitlement to the tax credit for tuition and examination fees, effective January 1, 2026. A new prescribed form must be completed and filed by each educational institution with Revenu Québec prior to January 1, 2026, to maintain its recognition as a recognized educational institution. As of January 1, 2026, the new prescribed form must be completed for all new applications.
• Reduce the adjusted cost of a qualifying security under the second cooperative investment plan to the cost of that security instead of 125 percent of such cost.
• Converting the “residence deduction for a member of the clergy of a religious order” and the “deduction for adult basic education tuition assistance” into non-refundable tax credits

Various tax credits abolished

As a part of the government’s review of the effectiveness and relevance of all fiscal measures and tax expenditures, the budget abolishes the following tax credits:

• The tax shield
• The non-refundable tax credit for political contributions
• The foreign researcher tax holiday
• The foreign expert tax holiday
• The tax holiday for foreign specialists assigned to operations of an international financial centre
• The tax holiday for foreign specialists working in the financial services sector
• The tax holiday for seamen engaged in international transportation of freight
• The tax credit for cultural patronage gift
• The deduction relating to the acquisition of an income-averaging annuity respecting income from artistic activities

Indirect and other tax measures

Tax rate on insurance premiums

The budget increases the tax on insurance premiums to 9.975 percent (from 9 percent) to align with the Quebec sales tax and will apply to insurance premiums paid after December 31, 2026.

Fuel tax refund for biodiesel

The budget proposes to abolish the fuel tax refund for biodiesel that is not mixed with another type of fuel at the time of its acquisition. This change will apply to biodiesel acquired after March 25, 2025.

Annual contribution and registration fees for vehicles

The budget proposes to raise the threshold for the additional registration fee for luxury vehicles to $62,500 (from $40,000). In addition, the exemption applicable to electric vehicles and plug-in hybrids valued between $40,000 and $75,000 will be withdrawn.

The budget also introduces an annual contribution for electric and vehicle plug-in hybrid vehicles.

These changes are effective after December 31, 2026.

Expanding the obligation to hold the Attestation de Revenu Québec in the construction sector

The budget announced that the government will make it mandatory for the construction sector and the residential renovation sector to hold the Attestation de Revenu Québec to obtain and renew a license from the Régie de Bâtiment du Québec.

The Attestation de Revenu Québec is a document confirming that a business or a person, in general, complies with their tax obligations.

Harmonization measures

The budget introduces various harmonization measures with the tax measures announced in the federal 2024 fall economic statement on December 16, 2024. The budget confirms that it will harmonize with the following measures:

• The scientific research and experimental development (SR&ED) changes with respect to the eligibility of capital expenditures. However, changes that will not be retained under the Quebec tax system include those with respect to:
  • expenditure limit and taxable capital phase-out thresholds,
  • the extension of the enhanced refundable tax credit to eligible Canadian public corporations, including elections for CCPCs, and
  • the eligibility of capital expenditures for computing the tax credit
• The extension of the accelerated investment incentive (AII) and immediate expensing measures, with a few exceptions noted below:
  • The extension of the AII will not apply to property that is a qualifying intellectual property included in Class 14.1, which becomes available for use before 2026
  • The AII will not apply to the deduction for cumulative Canadian development expenses claimed by a development corporation carrying on a mining business, nor will it apply to the deduction for cumulative Canadian development expenses incurred in Quebec claimed by a development corporation carrying on an oil business
• The exemption of the Canada disability benefit from tax
• Capital gains rollover on investments
• Reporting by non-profit organizations

The measures will be adopted only after the assent of any federal legislation, and these amendments will be applicable on the same dates as the federal measures with which Quebec has harmonized.

The budget confirms that the following measures will not be harmonized:

• The Canada Carbon Rebate Rural Supplement
• The Canada Carbon Rebate for Small Businesses
• The clean electricity investment tax credit and the Canada Infrastructure Bank
• The EV supply chain investment tax credit
• The clean hydrogen investment tax credit – methane pyrolysis

[i] The Act respecting the sectoral parameters of certain fiscal measures