E-Business tax credit: Changes to keep in mind
On March 25, 2025, the Government of Quebec presented its 2025–2026 budget, introducing major changes to the Tax Credit for the Development of E-Business. These changes will be gradually implemented, starting with tax years beginning after December 31, 2024, with some specific measures taking effect in 2026.
A Reimagined E-Business Focused on Artificial Intelligence (Starting in 2026)
The current E-Business Tax Credit will be replaced with a new version centered around companies that integrate artificial intelligence (AI) into their operations.
This reform aims to support higher value-added technology projects and to align tax incentives with the new realities of the IT sector, particularly those involving AI.
Changes to the Tax Credit Structure (For Tax Years Starting January 1, 2025)
While the overall credit rate remains at 30%, its structure will evolve:
- The refundable portion of the credit will gradually decrease from 24% to 20% by 2028 (a 1% reduction per year)
- Conversely, the non-refundable portion will increase from 6% to 10% over the same period
Modified Eligibility Criteria
To qualify for the E-Business Tax Credit, companies will now need to:
- Have a physical establishment in Quebec
- Employ a minimum of six eligible employees
- Generate at least 75% of their gross revenue from the information technology sector
- Ensure that 50% of their revenue comes from specific eligible activities such as: Software publishing; Computer systems design; Data processing and hosting, among others
End of the Salary Cap: Introduction of an Exclusion Threshold
The salary cap of $83,333 per employee is being eliminated. It will be replaced by an exclusion threshold based on the basic personal amount under Quebec’s tax system (e.g., $18,056 in 2024), proportionally adjusted to the number of eligible days per employee.
This measure aligns with the changes already announced for the SR&ED program.
Redefinition of Eligible Activities
Some types of activities will now be excluded from the program:
- Activities related to maintenance or upgrades of information systems or tech infrastructure
- For companies providing services to related entities, if more than 50% of their revenue comes from applications used outside Quebec, the credit rate will be reduced by half
In Conclusion
The overhaul of the E-Business Tax Credit reflects the Quebec government’s clear intent to modernize the program and promote technological innovation, particularly through the integration of artificial intelligence. IT companies will need to adapt to these new rules starting in 2025, with special preparation for 2026, when AI will be central to the program.
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