The 2025-2026 budget published by the Quebec government on March 25 came with its share of changes, particularly with regard to tax measures to promote R&D. The measures announced by the government in this budget have several goals.
Promoting R&D investment in Québec
Boosting innovation
Harmonize and streamline financial support at the various stages leading from concept to commercialization
Making the procedures for obtaining the R&D tax credit less complex and faster
Make Québec even more competitive in the fields of life sciences, artificial intelligence, aeronautics, and advanced materials, in an increasingly uncertain and volatile environment.
These changes, presented by the government as necessary to strengthen the province’s economy, are nevertheless a small revolution in the world of innovation. The provincial component of the Scientific Research and Experimental Development Tax Credit (formerly SR&ED) is giving way to the CRIC, the Research, Innovation and Commercialization Tax Credit. There are now two tax credits: the SR&ED Tax Credit at the federal level and the CRIC at the provincial level for Quebec. A dichotomy that is not very obvious and needs to be clarified with the help of an expert.
What do these step-by-step changes consist of?
Elimination of eight tax measures
The four R&D tax credits (the tax credit for researchers’ salaries, the tax credit for university research and for research carried out by a public research centre or a research consortium, the tax credit for pre-competitive research in private partnership and the tax credit for contributions and fees paid to a research consortium)
The Industrial Design Tax Credit
Tax credit for technological adaptation services
The two tax holidays for the hiring of foreign researchers and experts
Eligible companies
To be eligible for the CRIC, a corporation must have an establishment in Quebec and operate a business there. However, this definition is a bit vague insofar as it can correspond to a non-CCPC company, public and/or under foreign control.
Establishment of the CRIC, which will apply to:
Labor expenses (salaries) – 100% of the eligible amounts that are: Salaries of staff carrying out R&D activities and the salary of staff carrying out pre-marketing activities
Capital expenditure (“CAPEX” equipment only) – 100% of eligible amounts
Subcontracting contracts (R&D service providers, university, CCTT, or research consortium) – 50% of eligible amounts
Pre-market expenses include prototyping and scale-up. Previously included in R&D expenditures for SR&ED purposes, these expenditures are now separated from those defined as R&D for CRIC purposes. This will not change anything in the calculation of R&D tax credits. The only consideration, and an important one, is that pre-marketing expenses will be eligible for the CRIC if, and only if, they follow R&D expenses that took place in Quebec.
Key numbers from the 2025-2026 budget
Prior to the 2025-2026 budget, a Canadian-controlled private company benefited from a rate of 30% of eligible expenses up to a threshold of $3M of expenses, after subtracting the $50K exclusion threshold, and 14% above that $3M. The rate decreased linearly between 30% and 14% depending on the taxable capital of the company on a scale of $50M to $75M. With the application of the 2025-2026 budget rules, the 30% rate will only apply on the first $1M of eligible expenses, less the exclusion threshold, and a 20% rate that will apply to expenses above that. In addition, the taxable capital of a company will no longer be taken into account to determine the tax credit rate.
There is also an important change in the exclusion threshold. Prior to the 2025-2026 budget, the exclusion threshold applied to Small and Medium Enterprises (“SMEs”) was $50K, and increased linearly to $225K for businesses with taxable capital between $50M and $75M. With the 2025-2026 budget, the $50K threshold becomes a minimum. Indeed, the exclusion threshold taken into account will be the highest of the following values:
$50,000 or
The sum of the amount of personnel expenses taken into account for the calculation of the basic personal tax credit for each employee ($18,571 in 2025), adjusted in proportion to the employee’s time spent on R&D or pre-marketing activities (e.g. a company that has 10 employees who dedicate 75% of their time to R&D, the exclusion threshold SE = $18.571 x 10 x 0.75 = $139.282.5).
This new way of determining the exclusion threshold will be the same regardless of the size of the company. It is also important to note that for the same R&D payroll, the portion of the tax credit related to the payroll will be all the more important the fewer the number of employees but the higher the salaries.
Finally, the percentage of the amount of eligible subcontracting expenses has been standardized. Before the 2025-2026 budget, the percentage depended on the nature of the subcontracting entity; 50% for a contract research organization, 80% for a university or a CCTT. With the 2025-2026 budget, the percentage of the amount of eligible subcontracting expenses will be standardized and reduced to a single percentage of 50%, regardless of the nature of the subcontractor (ORC, University, CCTT, CLT).
The Deduction for the Commercialization of Innovations in Quebec (“DICI”)
In addition to these measures, the government wants to systematize the use of the DICI tax exemption program. The KIID, introduced in 2021 and largely underutilized, is a tax exemption program that aims to reduce the tax rate on a company’s income generated by the commercialization of its intellectual property (“IP”) assets. This concerns the marketing of a good or service. The eligible intellectual property asset (“APIA”) must also result from scientific research and experimental development activities carried out in part or in whole in Québec. More specifically, these activities must have contributed significantly to its creation, development or improvement.
The DICI allows a company to have the tax rate on this type of income reduced to 2%. It is important to note that the larger the share of revenue from the commercialization of IP assets relative to a company’s total revenues, the more advantageous the DICI will be.
To be eligible, a corporation must operate a business with an eligible establishment in Québec and derived income from the commercialization of an eligible intellectual property asset,
Such as:
An invention protected by a patent or supplementary eligible certificate of protection
Copyrighted software
A plant variety protected by a plant breeders’ rights
My “two cents”
CRIC versus SR&ED, what to think? Following in the footsteps of the federal government’s announcement last December to improve the federal SR&ED vote – a bill that has not yet been voted on – the arrival of the CRIC is the result of a necessary step by the Quebec government to modernize the provincial component of this cornerstone of innovation.
An excellent news is the eligibility of capital expenditures for the CRIC, as was the case until 2014. This measure, which is eagerly awaited and complements the federal component, will allow the companies concerned to consider investments that, until now, may have seemed unthinkable. This is a real boost to the competitiveness of Quebec companies.
Another piece of good news is the systematization of the use of the DICI, the “patent box” that does not say its name, resolutely encouraged by the government. This program, launched in 2021 and largely underused, will allow innovative companies to benefit from a reduced tax rate on their income from their IP. The amounts freed up can then be reinvested in R&D and the company’s growth strategy.
On the other hand, the impact of the new exclusion threshold, for which the $50K amount becomes a minimum, remains uncertain and will have to be studied on a case-by-case basis. While it is conceivable that capital expenditure on equipment could increase the tax credit and compensate for an increase in the exclusion threshold, it should be borne in mind that this is generally not a recurring expense. Through this measure, the provincial government has expressed its desire to prioritize the hiring of high value-added salaries. What you need to understand is that for the same R&D payroll, a company’s CRIC will be all the more important the higher the salary of its employees.
The number of changes and their depth will require a period of adaptation so that companies can take the measure of these new variables, such as salaries, exclusion threshold, equipment, pre-marketing expenses, and new tax credit rates. In addition, it should be noted that there is no systematic alignment of the improvements announced by Ottawa and Quebec, which will make claims more complex to file. The first “new versions” claims are planned for companies whose fiscal year ends in April 2026. This means that innovative companies will benefit from a year, or even more depending on their end of the fiscal year, to be helped by an expert in understanding and preparing the claim for the new R&D tax credits, another very good news.
Contact us today to learn how you can leverage the CRIC program to grow your business and stay ahead in an ever-evolving market.
