The 2025-26 Québec budget tabled by Finance Minister Éric Girard contains a slew of new initiatives in response to Canada’s trade war with the United States (US) while addressing longstanding provincial complaints regarding direct investment and tax credit supports.
The budget, which marks a record deficit for the province, introduced changes to Québec’s innovation tax credit system and revived an early-stage investment program with fresh funding. The government also committed $900 million in direct aid to businesses and over $600 million to mitigate the economic impacts of US tariffs.
“Québec’s budget is a shrinking pie, in which the innovation economy gets a relatively larger, more focused share,” said Louis-Félix Binette, executive director of startup support non-profit Mouvement des accélérateurs d’innovation du Québec (MAIN).
One tax credit to rule them all
The Québec government announced it will abolish eight refundable tax credits related to research and development and replace them with the brand-new refundable Research, Innovation and Commercialization Tax Credit (CRIC) to facilitate investment in innovation projects.
The streamlining is meant to combat the lower rates of R&D investment in Québec relative to Ontario and other G7 countries. The move also delivered a win to provincial business group Conseil de l’innovation du Québec, which had called for a simplification of the tax credit system.
The new tax credit, known as CRIC, covers 30 percent of the first $1 million in eligible R&D investments by Québec companies. It represents a consolidation of several tax credits, including for scientific research and experimental development, for fees paid to research consortiums, and for industrial design.
The new tax credit, known as CRIC, covers 30 percent of the first $1 million in eligible R&D investments by Québec companies.
Guillaume Lajoie, communications and public affairs manager at MAIN, said the change will make it easier for enterprises to get access to tax credits for R&D. The new credit will ease the pre-commercialization process by making the tax credit available for market testing, Lajoie added, and cover the expense of buying equipment that did not fall under the federal Scientific Research and Experimental Development tax credit.
Jean-François Harvey, Director of Québec Affairs at the Council of Canadian Innovators, welcomed the overhaul to the tax credit system, calling it a “step in the right direction.”
RELATED: Québec is executing its innovation plan. Will it pay off?
It’s not the only tax change impacting tech companies. The tax credit CDAE, which covers information technology (IT) adoption for businesses, is pivoting to CDAEIA, which specifically requires artificial intelligence (AI) to be part of any new tech integration companies claim through this tax credit.
The new budget did leave one burning tax question: whether the province will implement the controversial capital gains tax inclusion rate increase put forward by the federal government last year.
The budget currently states that Québec will match the federal government’s decision, but there is no mention of Prime Minister Mark Carney’s recent decision to cancel the increase.
“Québec will follow all official federal announcements closely and will make a decision once this information is known,” a spokesperson for the Ministry of Finance wrote to BetaKit in French.
Impulsion PME replaced with new $200-million fund
After months of no news on the fate of popular early-stage investment-matching program Impulsion PME, the government has announced a new $200-million investment vehicle using the money originally meant for Impulsion PME, including $50 million from the Stratégie d’innovation 2022-2027.
Impulsion PME (IPME) was considered a key investment-matching program in the early-stage tech ecosystem designed for startups to close their first rounds. Delivered through provincial investment agency Investissement Québec, the program’s quiet shuttering in November left some entrepreneurs struggling to raise financing.
DÉPART, a program geared towards regional economic development, was put on hold at the same time as IPME, and is now also back on with $15 million over two years starting 2026-27.
RELATED: Québec’s dismal seed-stage performance could spell trouble for province’s startup pipeline
Lajoie told BetaKit that this is a positive step for the early-stage ecosystem and represents a “shift” from negative attitudes about program closures in the fall. Seed-stage performance in the province also struggled throughout 2024, with ecosystem experts calling the numbers “concerning.”
The government is replacing the Plan québécois en entrepreneuriat (Québec Entrepreneurship Plan) 2022-2025 with Plan PME (Small Business Plan) 2025-2028. It is dedicating an initial $42 million over three years to the initiative.
Jean-Pierre D’Auteuil, a spokesperson for the Ministry of Economy, Innovation and Energy, wrote in an email to BetaKit that the new plan will be more expansive than the Québec Entrepreneurship Plan and include measures to help entrepreneurs invest in projects to boost productivity.
Tariffs prompt hefty support envelope
Faced with US tariffs on aluminum and steel and the threat of blanket tariffs on Canadian goods, the Québec government made good on its previous pledges to assist companies impacted by the trade war.
The budget laid out $400 million over two years in loans for businesses directly impacted by tariffs, and earmarked nearly $200 million for diversifying export markets and supply chains away from the US. Some Québec companies, including Montréal-based rip-resistant tights manufacturer SRTX, have already implemented layoffs in response to the economic uncertainty created by tariff threats.
The government committed $900 million in direct aid to businesses through the Fonds du développement économique to encourage Québec companies to adopt automation, robotics, digital transformation, and AI.
Key players in the tech and research ecosystem saw a boost, too. The budget allocated $100 million toward Bromont, Que. innovation zone Technum Québec, $54 million to support the province’s life sciences sector over three years, and $22 million toward research activities at Montréal-based AI institute Mila.
Under this innovation envelope, the government pledged $96 million to modernize government services, $73.4 million of which will go toward automation.
The commitments were part of a hefty $5.4 billion in support over five years dedicated to “stimulating wealth creation” in the province, the Québec government said.
Feature image courtesy Éric Girard on X.