Select Tax Highlights of the 2025-2026 Quebec Budget

On March 25, 2025, Quebec’s Minister of Finance, Eric Girard, tabled Quebec’s 2025-2026 Budget. This year’s budget, titled For a Strong Québec, is focused on investments to help Quebecers build a strong economy and contains several tax measures aimed at optimizing tax assistance for businesses, simplifying and updating the tax system, and fostering the funding of public services. The budget contains no new taxes and no income tax increases.

Below are a few of the proposed tax measures for businesses:

1. Implementing a new tax assistance system to foster scientific research and experimental development (R&D) activities – The budget proposes an overhaul of the R&D tax credit regime by introducing the tax credit for R&D, innovation and pre-commercialization (CRIC) and repealing several existing tax credits. The new simplified regime impacts additional activities, with the addition of pre-commercialization, and intends to provide a higher basic refundable tax credit rate of 20% and a more accessible increased rate of 30% as well as maximize R&D investment by making certain capital expenditures eligible. The CRIC will apply to a taxation year or a fiscal period beginning after March 25, 2025.

2. Changes to the tax credits for the development of e-business (TCEB) – The budget proposes certain changes to modernize the TCEB. In particular, the budget updates the list of activities eligible for the TCEB, focusing on e-business activities that significantly integrate artificial intelligence (AI) functionalities and removing activities related to maintenance or evolution. The budget also relaxes the criteria for eligible activities and services provided by adding data processing and hosting activities to promote the eligibility of AI businesses. The budget further proposes to reduce the tax assistance granted to corporations that carry out intercompany outsourcing for applications to be used exclusively outside Quebec. These amendments will generally apply — for both refundable and non-refundable tax credits — for taxation years beginning after December 31, 2025.

3. Changes to the refundable tax credit relating to mining or other resources – The budget introduces changes to the tax credit relating to mining or other resources, aiming to better support exploration corporations at the development stage and encourage corporations to carry out more projects related to critical and strategic minerals. Among other things, these changes will include (i) adding development expenses relating to mining resources incurred by a corporation or partnership in Quebec to eligible expenses, (ii) revising the tax credit rates applicable to the eligible expenses related to mining resources to 22.5% for expenses incurred by a specified qualified corporation and to 10% for expenses incurred by another qualified corporation and (iii) introducing a limit on eligible expenses of C$100-million per fiveyear period (which is to be shared between the members of the associated group). In addition, the budget proposes to enhance the rates applicable to projects related to critical and strategic minerals until December 31, 2029, in respect of eligible expenses incurred after March 25, 2025, but before January 1, 2030, and paid before January 1, 2030, so that the rate of the tax credit will be equal to:

• 45% in respect of such expenses incurred by a specified qualified corporation
• 20% in respect of such expenses incurred by other qualified corporations

4. Adjustments of the tax benefits relating to the flow-through share regime – The budget proposes to abolish the additional deduction for certain exploration expenses incurred in Quebec as well as the additional deduction for certain surface mining exploration expenses incurred in Quebec. These changes will generally apply to flow-through shares issued after March 25, 2025.

5.Changes to the public utility tax – The budget announces the gradual increase of the various rates used to calculate the public utility tax (PUT) starting in the 2027 calendar year until 2035. The budget also makes changes to the PUT exemption by including certain municipal or public bodies (or certain corporations owned by such entities) and provides a PUT refund for municipalities or municipal or public bodies where the tax exemption does not apply. These changes will apply as of the 2025 calendar year.

For more information on these tax developments, please contact any member of our Montréal Tax group.