Last week, Finance Minister Eric Girard presented Quebec’s 2024 budget, which includes major changes to two of the province’s flagship innovation tax credits.
More specifically, the budget proposes to adjust the balance between the refundable and non-refundable portions of the Electronic Business Development Tax Credit (CDAE) and the Multimedia Tax Credit (CTMM).
For the CDAE, the Quebec government will gradually increase the non-refundable portion—the part that requires companies to pay taxes in Quebec to qualify—from 6 percent today to 10 percent by 2028. At the same time, the refundable portion will decrease from 24 percent in 2024 to 20 percent by 2028.
| Year | Refundable | Non-Refundable |
| 2024 | 24% | 6% |
| 2025 | 23% | 7% |
| 2026 | 22% | 8% |
| 2027 | 21% | 9% |
| 2028 | 20% | 10% |
For the CTMM, which currently has no non-refundable portion, the total credit will also shift to a 20:10 split by 2028. The goal is to encourage more profitable companies in this sector to pay provincial taxes.
| Year | Refundable | Non-Refundable |
| 2024 | 30% | 0% |
| 2025 | 27.5% | 2.5% |
| 2026 | 25% | 5% |
| 2027 | 22.5% | 7.5% |
| 2028 | 20% | 10% |
Taken together, these changes will reduce the overall generosity of these programs, which cost the Quebec government nearly $850 million CAD in 2023.
This comes as Quebec faces an $11 billion budget deficit for 2024—possibly the largest in its history—and pushes back its plan to balance the budget by two years.
“Right now, we have no growth,” Girard said, pointing to last year’s interest rate hikes that pushed the deficit to nearly three times what was forecast for 2023.
With a goal of balancing the provincial budget by 2028, the government is now looking to the strength of Quebec’s media and electronics sectors to help improve the province’s economic outlook.
Businesses will need to pay taxes in Quebec at higher rates to continue qualifying
While both the CDAE and CTMM will remain in place, many companies that have never paid taxes in Quebec may now need to do so if they want to keep claiming non-refundable credits over the long term.
As reported by LaPresse, researchers have found that out of 702 companies eligible for both the CTMM and CDAE, only four paid taxes in 2019.
By 2028, the government expects to recover more than $365 million CAD by adjusting the refundable portion of both programs.
The 2024 budget also removes the salary caps for the CTMM ($100,000) and the CDAE ($83,333). This means companies will, in theory, be able to claim credits for higher-paid employees.
How to qualify for the CDAE
CDAE tax credits are designed for companies developing and selling software licenses or services (such as Software-as-a-Service, or SaaS). To qualify, your company must have at least 75 percent of gross revenue from IT sector activities, with half of those activities tied to a core area of IT.
Additionally, a qualifying company must have at least 6 full-time technical employees for the entire fiscal year of the CDAE claim, which differs from SR&ED in that it doesn’t have revenue or employee-number requirements (per se) as part of the qualifying criteria.
It’s important to note that there’s some flexibility here: Startups less than two years old can qualify for the CDAE as soon as they have six eligible technical employees on payroll for a given fiscal year.
Combining SR&ED, CDAE, and innovation capital in Quebec
Both SR&ED and CDAE can help founders recover salary costs, but each program has different requirements and credit rates, depending on its focus.
For example, the CDAE covers only the salaries of employees in technical roles (like developers and quality engineers) during the product development cycle. One key difference from SR&ED: this R&D must support a revenue-generating product that’s already on the market.
CDAE funding comes as a refundable tax credit of up to 24 percent and a non-refundable tax credit of up to 6 percent of each eligible employee’s salary (for 2024, at least). These credits apply to the full salary of the qualifying employee.
SR&ED, on the other hand, lets you claim credits on expenses like salaries, wages, materials used or transformed, subcontractor costs, and overhead—as long as they directly support eligible R&D in Canada. In short, the SR&ED refundable credit is based on the percentage of an employee’s time spent on R&D compared to their total salary.
CDAE is especially valuable for more established companies that have made progress in development but need extra funding to scale—particularly when bringing software innovations to market.
There are options for businesses that want to optimize both CDAE and SR&ED on the provincial level to maximize the tax credit amount.
Doing this is tricky, however, and requires not just deep knowledge of existing tax code, but the ability to communicate the nature of innovation both from the business-side and technical-side of R&D.
This is especially important if you’re applying for the first time, or if you’ve faced challenges with your application in the past—even if you met all the criteria.
