2025 Québec budget tax highlights

On March 25, the Québec government released its 2025 budget. The following are highlights of the key tax measures.

Personal tax measures

No personal income tax rate changes were announced in this year’s budget. The current personal combined income tax rates for 2025 are outlined below:

Tax compliance for foreign property

The budget introduces a new reporting requirement for Québec taxpayers in respect of foreign property held outside Canada to be filed with Revenu Québec. The form will be similar to the federal T1135 and will be due on or before the filing due date of the reporting entity. The budget clarified requirements for filing a form equivalent to the federal T1134 are not part of this announcement. These measures take effect pending assent.

A designated Québec entity could be:

• An individual resident in Québec
• A corporation that simultaneously resides in Canada and has an establishment in Québec
• A trust that is a resident in Québec
• A partnership where the partners’ share of income or loss is less than 90 per cent of the partnership’s income or loss for the fiscal period, and whose foreign property exceeds $100,000 at any time during the year

There will be a penalty of $500 per month (to a maximum of 24 months) for failing to file the new form. The penalty may be doubled if the entity has been given formal notice to file and has failed to meet the deadline. An additional penalty of five per cent will apply for failure to file for more than 24 months, as well as a maximum penalty of five per cent of the cost of the designated property for false statements or omissions. The budget also extends the period of assessment and reassessment to enable Revenu Québec to administer this new reporting requirement.

Other personal tax credits

The budget announced several changes to various tax credits and incentives currently available, specifically:

• An increase to the family allowance for bereaved parents.
• The age requirement for the refundable tax credit for childcare expenses will be lowered to 14 years old (from 16 years old) for the 2026 tax year.
• Removal of homeopaths, naturopaths, osteopaths and phytotherapists from the definition of “practitioner” for the purpose of medical expenses.
• Conversion of the “residence deduction for a member of the clergy of a religious order” and the “deduction for adult basic education tuition assistance” to non‑refundable tax credits.
• Reduce the adjusted cost of a qualifying security under the second cooperative investment plan to the cost of that security instead of 125 per cent of such cost.
• Educational institutions currently granting tuition receipts will be required to complete and file a new prescribed form with Revenu Québec to continue to be eligible as a recognized educational institution.

In addition, the budget abolished several tax credits, specifically:

• 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

Corporate tax measures

No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2025 are outlined below:

Scientific Research and Experimental Development (SR&ED) tax credits

The budget aims to replace several refundable SR&ED tax credits with a new refundable tax credit for SR&ED, innovation and pre‑commercialization (CRIC). This new credit offers a higher basic rate, an accessible increased rate and includes certain capital expenditures to boost SR&ED investment. Below is a high‑level summary of the key measures announced.

Eligible corporations

A corporation or corporation that is a member of an eligible partnership (other than an excluded corporation) carrying on business in Québec through an establishment may be able to benefit from CRIC on eligible SR&ED expenditures.

Calculating the tax credit

The basic rate of the new refundable tax credit will be 20 per cent for eligible expenditures over a $1 million limit (shared by an associated group). The rate may be increased to 30 per cent for the first of the expenditure limit of an eligible corporation’s expenditures relating to SR&ED activities or pre‑commercialization activities over the applicable exclusion threshold, regardless of its assets.

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

Eligible expenditures will include salaries/wages and equipment expenses related to SR&ED or pre‑commercialization activities, and 50 per cent of the amount of a subcontract entered into with a university, public research centre or research consortium.

The budget also proposes to make certain capital expenditures eligible for the CRIC.

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 SR&ED
• 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 a research consortium
• Tax credit for technological adaption services
• Tax credit for design (industrial component)

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

The budget introduces consequential changes to the IDCI, applicable to taxation years beginning after March 25, 2025. As a result of the implementation of the CRIC and abolition of various SR&ED credits, in many cases, expenditures relating to pre‑commercialization activities will not be considered when calculating the Québec nexus ratio for the CRIC. Similarly, expenditures relating to SR&ED activities considered in the calculation of the Québec nexus ratio will not be reduced by the CRIC exclusion threshold.

Stock options deduction

Revenu Québec provides a 25 per cent stock options deduction, which may be increased to 50 per cent if issued by a qualified corporation. The new CRIC parameters can materially change the deduction.

If a corporation carries on a business, has an establishment in Québec and an amount under CRIC was allocated to it, it should be a qualified corporation for security options deduction. This change will apply as of the 2026 taxation year. It may also be possible to meet these requirements in 2025.

Tax credits for the development of e‑businesses

The budget introduces changes to 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 (AI), and
• Non‑refundable tax credit for the development of e‑business integrating AI.

The budget proposes to modernize the activities eligible for these credits. The following are the proposed amendments:

• An eligible activity must be primarily related to e‑business integrating 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 tax credits for taxation years beginning after Dec. 31, 2025. These changes may also apply where the corporation files a timely election for a taxation year beginning after March 25, 2025 and before Jan. 1, 2026.

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 Québec after March 25, 2025.
• Tax credit rates applicable to eligible expenses related to mining resources are revised to 22.5 per cent for expenses incurred by a specified qualified corporation and to 10 per cent for expenses incurred by other qualified corporations.
• Enhancing the rates of the tax credit applicable to projects related to critical and strategic minerals to 45 per cent in respect of expenses incurred by a specified qualified corporation and to 20 per cent in respect of expenses incurred by qualified corporations. The enhanced rates will apply to eligible expenses incurred and paid after March 25, 2026, but before Jan. 1, 2030.
• Introducing a limit on eligible expenses for an associated group of $100 million per five‑year period for taxation years of an eligible corporation beginning after March 25, 2025.

Health Services Fund (HSF) employer contribution

This contribution rate will be 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. The threshold for 2025 is $7.8 million. The budget proposes to remove 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.

Other tax measures

The budget announced changes to several tax credits and incentives currently available to businesses as follows:

• After March 25, 2025, abolish the additional deduction in respect of certain exploration expenses and additional deduction in respect of certain surface mining exploration expenses incurred in Québec under the flow‑through share regime.
• After March 25, 2025, abolish the additional capital gains exemption in respect of certain resource properties.
• Extend the tax credit for the digital transformation of print media to Dec. 31, 2025.
• After March 25, 2025, abolish the tax credit to foster synergy between Québec businesses. Specifically, Investissement Québec will not accept any new applications for the issuance of an investment certificate for the tax credit to foster synergy.

Next steps

Contact your Baker Tilly advisor to learn more about how we can help you navigate the complexities of the Canadian tax system.