The Tax Credit for the E-Business (CDAE) has long been a vital support mechanism for Quebec businesses engaged in technology development.
However, in 2025, this credit underwent a significant transformation to better align with the rapidly evolving digital landscape.
Renamed E-Business and Artificial Intelligence (CDAEIA), the program now explicitly targets the integration of artificial intelligence (AI) technologies within the digital operations of Quebec-based companies.
The revised rules, effective for fiscal years starting after December 31, 2025, introduce stricter eligibility criteria, with a clear focus on projects that deliver high value-added technological advancements.
A Refocused Orientation on Artificial Intelligence
The most significant change concerns the requirement for substantial AI integration in eligible activities.
Unlike the previous program, which did not require a direct connection to AI, the CDAEIA demands that developed solutions include AI components that substantially modify the performance, processes, or value of a system.
Specifically, AI can no longer be an accessory or superficial feature. It must actively drive improvements in efficiency, decision-making, or innovation.
This requirement aims to channel the tax credit towards structuring initiatives capable of generating real innovation, distinguishing development activities from simple adaptation or maintenance tasks.
CDAEIA Credit Rates: New Structure and Calculation Methods
While the fundamental rate of the tax credit remains at 30% of eligible salaries. This amount is now split into refundable and non-refundable portions, which gradually adjust over time.
Here is the schedule:
| Calendar Year | Refundable Credit | Non-Refundable Credit | Total Credit |
|---|
| 2025 | 23% | 7% | 30% |
| 2026 | 22% | 8% | 30% |
| 2027 | 21% | 9% | 30% |
| 2028 and beyond | 20% | 10% | 30% |
One major change is the elimination of the previous salary ceiling of $83,333. This removal enables companies to claim credits on higher salaries, which is particularly advantageous for attracting and retaining highly qualified professionals in AI and related tech fields.
Here’s a strategic overview of the key changes between the programs:
Tax Credit Program Comparison| Program Component | CDAE (Existing – Through 2025) | CDAEIA (Upcoming – From 2026) |
|---|
| Project Scope | Broad-based e-business transformation activities | Requires substantial AI or automation implementation |
| Workforce Coverage | Encompasses technical and support personnel | Targets AI specialists, developers, and technical teams |
| Credit Benefits | 24% refundable credit plus 6% non-refundable | 23% refundable credit (phasing down to 20% by 2028) |
| Compensation Limits | Capped at $83,333 per eligible employee | No upper limit, minimum qualification threshold $18,571 |
| Strategic Focus | Supporting digital business transformation initiatives | Advancing AI, intelligent systems, and cutting-edge tech |
| Program Coordination | Can be combined with SR&ED credits | Stackable with SR&ED and may coordinate with CRIC |
However, to balance this, an exclusion threshold has been introduced. In 2025, this threshold is set at $18,571 per employee, representing the minimum non-eligible amount. This means that only salaries exceeding this threshold qualify for the credit.
Companies must therefore carefully structure compensation to maximize eligibility.
Credit Reduction in Case of Dependency Links
Another notable adjustment involves projects carried out by companies that have a “dependency link” with other entities.
This situation typically arises when a company undertakes development work for a related entity or subsidiary. If the applications developed are intended exclusively for use outside Quebec, the credit rate is reduced by half, from 30% to 15%.
This rule discourages the allocation of credits to projects benefiting external jurisdictions and ensures that the incentive primarily supports the Quebec economy.
Importantly, the definition of dependency has been broadened to include not only ownership ties but also significant contractual relationships such as supply, licensing, or commercialization agreements.
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Inclusion of Data Processing and Hosting Activities
On a positive note, the CDAEIA has expanded the scope of eligible activities to include data processing, hosting, and related services classified under code 51821.
This allows a greater number of companies specializing in digital infrastructures or cloud services to qualify for the credit, provided AI is significantly integrated into the solutions delivered.
Early Application Possible for Eligible Companies
Although the official rules take effect for fiscal years starting after December 31, 2025, companies have the option to adopt the new program earlier, for fiscal years beginning after March 25, 2025, if they notify Investissement Québec in advance.
This early adoption opportunity can be strategically valuable for businesses whose projects already align with CDAEIA requirements.
By opting in sooner, they can benefit from the revised credit structure and potentially accelerate their innovation initiatives with AI integration.
Concrete Implications for Businesses
The cumulative effect of these rule changes has significant practical consequences for Quebec businesses, both operationally and strategically:
- Increased Selectivity: Companies offering a broad range of services, including IT, marketing, human resources, and technical support, will need to clearly demonstrate that their revenues from IT activities dominate their business profile. This necessitates precise revenue tracking and categorization.
- Necessary Repositioning: Consulting firms, outsourcing providers, and temporary staffing agencies must ensure that contracts explicitly target IT and AI-related activities. Vague or mixed assignments may jeopardize eligibility, pushing some firms to reevaluate their service offerings and client engagements.
- Risk for Hybrid Business Models: Companies combining IT services with management consulting, training, or hardware sales may find it increasingly difficult to meet the stricter criteria. Some that previously benefited from the CDAE might face partial or complete exclusion under the CDAEIA.
- Importance of Fiscal and Contractual Planning: Compliance now requires a granular approach to structuring contracts, revenue flows, and personnel allocations. Businesses will need to collaborate closely with tax experts and legal advisors to navigate these complex requirements and maximize their credits.
Outlook and Recommendations
Given these transformative changes, it is imperative for Quebec companies to start preparing now.
This preparation includes reviewing current and planned technological projects, aligning internal structures, and possibly restructuring operations to fit the new CDAEIA framework.
Engaging with tax advisors specialized in innovation credits and experts in AI technology will be crucial.
Together, they can help optimize eligibility, ensure compliance, and maximize the financial and innovative benefits of the program.
By proactively adapting to these rules, companies can not only secure valuable tax credits but also strengthen their competitive position through meaningful AI-driven innovation.
The CDAEIA represents an opportunity to turn regulatory change into sustainable growth and long-term technological leadership.
Connect with our specialized tax advisors today to develop a winning strategy that maximizes your CDAEIA benefits.
