28 March 2025 Canada | Quebec budget 2025-2026
On 25 March 2025, Québec Finance Minister Éric Girard tabled the province's fiscal 2025—2026 budget. The budget contains several tax measures affecting individuals and corporations. The budget contains no new taxes and no income tax increases. The minister anticipates a deficit of CA$13.6b for fiscal 2025—2026 (after contributions to the Generations Fund) and CA$9.5b for fiscal 2026—2027, and projects deficits for each of the next two years. The government's objective is to restore fiscal balance by fiscal 2029—2030.
2 Effective for tax years beginning on or after 1 January 2017, a Canadian-controlled private corporation (CCPC) must meet certain qualification criteria concerning the minimum number of hours paid to benefit from the small-business tax rate. The minimum-number-of-hours-paid criterion requires that an eligible corporation's employees work at least 5,500 hours annually, and the amount of the deduction is reduced linearly when the hours are between 5,500 and 5,000 hours. A maximum of 40 hours per week per employee is considered. Special conversion rules apply to take into consideration hours worked (but not necessarily paid in the form of wages) by actively engaged shareholders who hold, directly or indirectly, shares of the corporation that carry more than 50% of the voting rights. 3 The federal corporate income tax rates for manufacturers of qualifying zero-emission technology are reduced to 7.5% for eligible income otherwise subject to the 15% federal general corporate income tax rate or 4.5% for eligible income otherwise subject to the 9% federal small-business corporate income tax rate. These reductions are not reflected in the combined federal and Québec rates above. 4 An additional federal tax applies to banks and life insurers at a rate of 1.5% on taxable income (subject to a CA$100m exemption to be shared by group members). The budget proposes a refundable tax credit for research and development (R&D), innovation and pre-commercialization (the CRIC). The CRIC would essentially replace various credits to simplify the province's fiscal measures. This simplification would impact additional activities by adding pre-commercialization and including more eligible expenditures, such as capital expenditures, compared to the credits replaced. The CRIC would apply to a fiscal period or tax year, as the case may be, beginning after 25 March 2025. To qualify for the CRIC, an "eligible corporation" (other than an excluded corporation) or an "eligible partnership" must carry on a business in Québec and undertake in Québec, or cause to be undertaken on its behalf in Québec as part of a contract, R&D or pre-commercialization activities in respect of one of these businesses. The base rate for the CRIC would be 20% and may be increased to 30% for a maximum of CA$1m in eligible expenditures, regardless of the eligible corporation's assets. The tax credit from which an eligible corporation may benefit would be calculated using the excess of the sum of its expenditures relating to R&D and pre-commercialization activities, for the tax year, over the amount of its exclusion threshold applicable for that tax year. Eligible expenditures for the CRIC would be similar to current qualified expenditures for the purposes of (1) the tax credit for salaries (R&D), and (2) the R&D tax credit (research contract) (salaries and wages are calculated as either all or 50% of the portion of the consideration, as the case may be, paid under a contract to a subcontractor, an eligible public research center, a research consortium or an eligible university entity). In addition, the CRIC would expand eligible expenditures to include capital expenditures (with certain exclusions) relating to acquiring property used in R&D activities or pre-commercialization activities undertaken in Québec in the year or period. The property must not, before its acquisition, have been used for any purpose nor have been acquired to be used or leased for any purpose. A capital expenditure would be deemed not to have been incurred before the property is considered available for use. The exclusion threshold, for a tax year or fiscal period, would be the greater of CA$50,000 or the total of the "R&D employees threshold" and the "pre-commercialization employees threshold."1
Following the introduction of the CRIC and the abolition of the tax credit for salaries (R&D) and the R&D tax credit (research contract), the budget proposes consequential adjustments to the variables of the fraction considered for calculating the ratio for the purposes of the IDCI. Expenditures relating to pre-commercialization activities would not be taken into account elsewhere in this calculation. Similarly, expenditures relating to R&D activities taken into account in calculating the Québec nexus ratio would not be reduced by the CRIC exclusion threshold. These changes would apply to tax years that begin after 25 March 2025. Following the introduction of the CRIC and the abolition of four tax credits for R&D, the budget proposes consequential amendments to the securities options deduction. More specifically, eligibility for the deduction rate would be increased to 50% to account for the CRIC parameters. For 2026 and subsequent calendar years, a corporation would qualify as a qualified corporation for a calendar year if, in the year, it carries on a business in Québec and has an establishment there, and if either of the following conditions is met:
For the 2025 calendar year, a corporation would qualify as a qualified corporation if, in 2025, it carries on a business in Québec and has an establishment there, and if either of the following conditions is met:
The budget proposes to abolish a number of tax measures as a result of implementing the CRIC. These abolitions would apply, with a few exceptions, to the following credits for the tax year or fiscal period of a taxpayer or partnership, as the case may be, beginning after 25 March 2025:
Modernization of tax credits for developing e-businesses (TCEB) and reducing applicable rates in certain circumstances
These changes would apply to a tax year that will begin after 31 December 2025. They may also apply, where the corporation files an election (within the prescribed time limits) in writing with Investissement Québec, for a tax year that begins after 25 March 2025 and before 1 January 2026. A change would also be made to reduce the tax assistance to corporations that provide services to persons with whom they are not dealing at arm's length, in relation to an application intended to be used exclusively outside Québec. To this effect, the corporation certificate would have to specify the proportion of a corporation's gross revenue derived from activities included in the groups described under certain NAICS codes and that are covered by this change (two proportions must be determined). When any one of these proportions is at least 50%, the rates applicable to the TCEB would correspond to half of the rates otherwise applicable for that tax year, as shown in the table below. This change would apply to a tax year that begins after 31 December 2025.
1 A qualified corporation whose taxation year does not correspond to the calendar year must, in calculating its tax credits for a tax year, take into account the rates in effect for the calendar year in which its tax year begins. The budget proposes several changes to the refundable tax credit relating to mining or other resources. Development expenses incurred after 25 March 2025 that are related to mining resources incurred in Québec would be added to the eligible expenses for the tax credit. The development expenses would be those corresponding to the Canadian development expenses that would be described in paragraphs b.0.2 and b.1 of section 408 of the Taxation Act if these paragraphs were to be read by replacing "Canada" with "Québec." The tax credit rates applicable to eligible expenses relating to mining resources would be revised for expenses incurred after 25 March 2025, as described in Table C below. The tax credit rates would be increased for projects related to critical and strategic minerals until 31 December 2029, in respect of eligible expenses incurred after 25 March 2025, but before 1 January 2030, and paid before 1 January 2030, as described in Table C below. A limit on eligible expenses of CA$100m per five-year period would be introduced. This change would apply to a tax year of an eligible corporation that begins after 25 March 2025. If a qualified corporation is a member of an associated group, the balance of cumulative eligible expense limit for the year would be subject to a sharing agreement between the members of the associated group in accordance with the usual rules. In addition, if eligible expenses are incurred as part of a joint venture, all eligible expenses relating to the expenses incurred as part of this joint venture would also be subject to a cumulative limit of CA$100m. The balance of the cumulative eligible expense limit of a joint venture would be calculated as if the joint venture were a partnership whose fiscal period ends on 31 December.
1 Eligible expenses mainly attributable to one or more critical and strategic minerals would be eligible for the increased rates until 31 December 2029. After that date, they would be eligible for the rates applicable to eligible expenses related to other mining resources. The budget proposes to abolish the additional deduction for certain exploration expenses incurred in Québec as well as the additional deduction for certain surface mining exploration expenses incurred in Québec. These amendments would apply to flow-through shares issued after 25 March 2025. However, they would not apply to shares issued after that day, but before 1 January 2026, when they are issued following an application for a receipt for a preliminary prospectus made on or before 25 March 2025. Similarly, the changes would not apply to shares issued after 25 March 2025, 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 31 May 2025. The budget proposes abolishing the additional capital gains exemption for certain resource properties. Such abolition would be applicable for a disposition occurring after 25 March 2025. The budget proposes to extend the refundable tax credit to support the digital transformation of print media companies. Accordingly, the eligibility period for the refundable tax credit for qualified expenditures would end on 31 December 2025. In addition, if the expenditure relates to the acquisition of qualified property, the property must be acquired before 1 January 2025. The budget proposes to abolish the tax credit to foster synergy between Québec businesses. The tax credit would be abolished as of 26 March 2025. Consequently, the Act respecting the sectoral parameters of certain fiscal measures would be amended so that Investissement Québec would not accept new applications for the issuance of an authorized investment certificate for purposes of the synergy capital tax credit as of 26 March 2025. This abolition would not impact the eligibility of corporations that hold such a certificate or have applied to Investissement Québec for the issuance of an authorized investment certificate on or before 25 March 2025. These corporations would be able to issue shares of their capital stock for an amount not exceeding the authorized investment amount indicated in their authorized investment certificate, and qualified investors acquiring these shares would be able to benefit from the synergy capital tax credit under the current rules. The budget proposes a 31 December 2027 due date for the additional deductions relating to public transit and the organization of an intermunicipal shared transportation service. Accordingly, no amount may be deducted in computing the income of a taxpayer from a business for amounts paid after 31 December 2027 in this regard. Consequential adjustment for taxing benefit from employer for using public transit or shared transportation services The budget proposes to tax the value of a benefit received from an employer relating to the use of public transit or shared transportation. Accordingly, an individual must include, in computing their income, the value of the benefit received by the individual from their employer after 31 December 2027, for an eligible transit pass, an eligible paratransit pass or from the use of an intermunicipal shared transportation service. The budget proposes to integrate, with adaptations, the measures presented in the federal government's 2024 Fall Economic Statement2 relating to:
For taxable income exceeding CA$129,950, the 2025 combined federal — Québec personal income tax rates are outlined in Table E.
2 The federal basic personal amount comprises two elements: the base amount (CA$14,538 for 2025) and an additional amount (CA$1,591 for 2025). The additional amount is reduced for individuals with net income exceeding CA$177,882 and is fully eliminated for individuals with net income exceeding CA$253,414. Consequently, the additional amount is clawed back on net income exceeding CA$177,882 until the additional tax credit of CA$199 is eliminated; this results in additional federal income tax (e.g., 0.27% on ordinary income) on net income between CA$177,883 and CA$253,414. The budget proposes that family allowance payments, supplement for handicapped children (SHC) and supplement for handicapped children requiring exceptional care (SHCREC) payments, where applicable, be extended for 12 months from the month following the month that includes the day of an eligible dependent child's death. This measure would apply for deaths occurring after 30 June 2025. As of the 2026 tax year, for the purposes of the tax credit for child care expenses, the age of 16 included in the definition of "eligible child" would be reduced to 14. As of 1 January 2026, would amend Québec tax legislation so the term "practitioner" in the Taxation Act no longer includes homeopaths, naturopaths, osteopaths and phytotherapists. As of 1 January 2026, for the purposes of the tax credit for tuition and examination fees, the budget proposes that an educational institution offering courses that furnish a person with skills for, or improve a person's skills in, an occupation, would be recognized by Revenu Québec only if it meets at least one of the first four criteria described below, and provided it is not excluded according to the criterion relating to the health sector (criterion number five below):
To maintain recognition, each educational institution currently recognized by Revenu Québec would be required to complete the new prescribed form before 1 January 2026. As of 1 January 2026, the new prescribed form must be completed for all new applications for designation; applications must be renewed every five years. As of the 2027 tax year, educational institutions recognized by Revenu Québec would be required to issue an RL-8 slip indicating the amount of tuition fees paid by an individual. In addition, as of the 2026 tax year, students who claim the tax credit would be required to certify, in their income tax return for the year, that they took the training in question to acquire or improve the skills required to practise a profession. The budget proposes that the adjusted cost of a qualifying security for an individual would be the cost of that security, determined without taking into account borrowing costs and other costs related to the acquisition, instead of 125% of such cost. This measure would apply for a qualifying security acquired after 25 March 2025. The budget proposes that the residence deduction for a member of the clergy or a religious order be converted into a non-refundable tax credit for tax years after 2025. The unused portion of the new tax credit would not be transferable to a spouse. In addition, the tax credit would only have to be considered at 50% when calculating Québec alternative minimum tax. The budget proposes that the deduction for adult basic educational tuition assistance be replaced by a non-refundable tax credit for tax years after 2025. The unused portion of the new tax credit would not be transferable to a spouse. In addition, the tax credit would be considered at 100% when calculating the Québec alternative minimum tax.
Abolishing the above-mentioned tax holidays would not impact the eligibility of individuals for whom a researcher, expert or specialist qualification certificate is already held by the eligible employer (or for whom certificates have already been issued in the case of seamen) or for whom an application for the issuance has been filed by the eligible employer (or an application for the issuance of a certificate in the case of seamen) on or before 25 March 2025. For greater clarity, an individual, or the individual's succession, who will have registered a pledge on or before 25 March 2025, would continue to benefit from the cultural patronage tax credit related to such donation. The budget proposes to set the tax rate on insurance premiums at the same rate as the Québec sales tax (9.975%). This increase would apply to all insurance premiums paid after 31 December 2026. 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 would apply for biodiesel acquired after 25 March 2025. The budget proposes that legislative or regulatory amendments be made to efficiently detect new tobacco smuggling schemes, increase pressure on smugglers and facilitate investigative and prosecution work by ACCES (Actions concertées pour contrer les économies souterraines) tobacco partners. The budget proposes to remove, as of 2026, the automatic annual indexation of the total payroll threshold used to determine the eligibility for reducing the HSF contribution rate offered to SMBs.
The budget proposes to raise the threshold for the additional registration fee for luxury vehicles from CA$40,000 to CA$62,500; in addition, the exemption applicable to electric vehicles and plug-in hybrids would be withdrawn. These measures would apply as of 1 January 2027. The budget proposes an annual contribution for electric vehicles (CA$125) and plug-in hybrid vehicles (CA$62.50) as of 1 January 2027. This contribution would be indexed annually. The budget proposes a new reporting requirement for foreign property held outside Canada using a new prescribed form to be completed and filed with Revenu Québec for a tax year or fiscal period, as the case may be. This measure will apply as of a date to be determined after the assent of the bill giving it effect. Designated foreign property subject to the new reporting requirement will be essentially the same as foreign property subject to the federal tax legislation and reported using form T1135. Similarly, the terms "reporting entity" and "designated Québec entity" will be similar to the terms "reporting entity" and "specified Canadian entity" in the federal tax legislation (including the threshold of CA$100,000 for the cost amount of designated foreign property). The new Québec prescribed form will need to be filed with Revenu Québec by a reporting entity on or before the same filing due date as that of the tax return applicable to the reporting entity for the year.
The budget also proposes an extension of three years after the end of the normal assessment period for assessment or reassessment.
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