Quebec’s tech sector is experiencing a major shift as artificial intelligence (AI) becomes the engine powering innovation across every industry in the province. 

To keep up, the Quebec government is overhauling its approach to supporting technology growth—specifically, by updating and refocusing the main eligibility criteria for Quebec’s flagship innovation tax credit program starting in 2026. 

For tax years beginning after December 31, 2025, the Quebec government has decided to redirect the Tax Credit for the Development of E-Business (CDAE) and introduce a new tax credit focused on artificial intelligence: the CDAEIA. This change demonstrates Quebec’s commitment to supporting high-value, cutting-edge technology sectors where the province excels. 

The move from CDAE to the new AI-focused CDAEIA is more than a name change—it’s a strategic shift that will reshape how Quebec tech companies access government funding. 

Understanding the Shift from CDAE to CDAEIA 

Why the Change? 

Since 2008, the CDAE has supported activities related to designing and developing IT systems and software. But with rapid advances in technology—especially AI—IT services and solutions have evolved. Some activities that once qualified under the CDAE no longer represent high added value for specialized IT companies. 

The CDAEIA isn’t just a minor update—it’s a complete rethink of how Quebec supports tech innovation. While the CDAE covered a broad range of e-business activities, the CDAEIA is designed specifically for companies leading the way in AI integration. 

What Qualifies Under CDAEIA? 

To qualify for the CDAEIA, your activities must be directly related to information system design or software publishing, and must significantly incorporate AI features. The government defines AI solutions as applications or software that use advanced technologies like machine learning and neural networks to perform specific tasks, automate business processes, analyze large datasets, and deliver personalized customer experiences. 

It’s important to note that maintenance or upgrades to information systems and tech infrastructure will no longer be eligible—even if they support your main activities. This signals Quebec’s intent to fund truly innovative, forward-looking projects, not routine IT upkeep. 

Key Changes to Eligibility and Benefits 

Enhanced Revenue Criteria 

The CDAEIA introduces more sophisticated revenue requirements that better reflect today’s AI business models. The new gross revenue criteria will be tailored to companies specializing in AI, where a significant share of revenue may come from hosting or data processing services. 

Evolving Tax Credit Structure 

While the overall tax credit rate remains at 30%, the breakdown is shifting strategically: 

  • 2025: 23% refundable, 7% non-refundable 
  • 2026: 22% refundable, 8% non-refundable 
  • 2027: 21% refundable, 9% non-refundable 
  • 2028 and beyond: 20% refundable, 10% non-refundable 

This gradual adjustment reflects the government’s long-term strategy to balance immediate cash flow support with sustainable tax policy. 

Refined Employee Requirements 

To qualify, companies must have at least six eligible full-time employees, each dedicating at least 75% of their time to eligible AI-related activities. Only labor costs above this threshold will be eligible, with the exclusion threshold set at the basic personal amount under the individual tax system. 

No more salary cap

However, an Exclusion Threshold now applies: the first $18,571 (the basic personal amount) of salary is excluded from CDAE-IA calculations.

Strategic Considerations: CDAEIA vs. SR&ED 

For Canadian tech companies, knowing when to use the CDAEIA versus the federal SR&ED program is key to maximizing your funding. Recent changes to both programs create new strategic opportunities. 

SR&ED Program Updates for 2025 

The federal government has significantly improved the SR&ED program for tax years starting after December 16, 2024: 

  • The expenditure limit for the enhanced 35% rate increases from $3 million to $4.5 million 
  • Extend eligibility for the enhanced 35% refundable tax credit to eligible Canadian public corporations 
  • Restore the eligibility of capital expenditures for both the deduction against income and the investment tax credit components of the SR&ED program 

When to Choose CDAEIA vs. SR&ED 

You don’t have to choose just one—many companies can benefit from both programs at the same time. Here’s how to think strategically about each: 

Choose CDAEIA if: 

  • Your company is based in Quebec and is heavily involved in AI integration 
  • You’re developing or implementing AI-powered business solutions 
  • Your work includes building AI applications that automate processes or deliver data-driven insights 
  • You need funding for ongoing AI development, not just experimental research 

Choose SR&ED if: 

  • Your work involves technological uncertainty and systematic investigation 
  • You’re conducting experimental development to solve technical challenges 
  • You’re engaged in applied or basic research 
  • You need to solve specific technological challenges through experimentation 

Leverage Both Programs if: 

  • You’re a Quebec-based company working on both AI implementation and R&D 
  • Your AI development involves experimental research to overcome technological hurdles 
  • You have both routine AI development and breakthrough research projects 

Funding Strategy: Maximizing Government Support at Every Growth Stage 

Early-Stage Startups (Pre-Revenue to $1M Revenue) 

At this stage, companies usually benefit most from SR&ED, since their work is highly experimental. Early-stage startups are often tackling fundamental technology problems and building proof-of-concept solutions. The new SR&ED expenditure limit (up to $4.5 million for the 35% refundable credit) offers strong support during these capital-intensive R&D phases. 

Growth-Stage Companies ($1M-$10M Revenue) 

As companies grow and start deploying proven AI technologies in business solutions, CDAEIA becomes more valuable. These companies typically have established AI teams working on commercialized solutions rather than pure research. Combining CDAEIA for implementation and SR&ED for ongoing R&D creates a powerful funding mix. 

Mature Companies ($10M+ Revenue) 

Larger companies can use both programs strategically—claiming CDAEIA for Quebec-based AI development, while using SR&ED for experimental R&D. With SR&ED’s restored capital expenditure eligibility, they can also claim credits on major equipment investments. 

Implementation Timeline and Preparation 

2025: Transition Year 

Now is the time to prepare for the CDAEIA transition by: 

  • Documenting how AI is integrated into current projects 
  • Identifying which activities will qualify under the new rules 
  • Setting up systems to track AI-specific development work 
  • Training finance and project management teams on the new requirements 

2026 and Beyond: Full Rollout 

The CDAEIA aims to make Quebec an even better place for innovation by streamlining and improving the tax credit system. The changes will provide an extra $271.5 million in financial support over five years. 

Maximizing Your Strategic Position 

Documentation Best Practices 

To succeed with both CDAEIA and SR&ED, you’ll need thorough documentation. For CDAEIA, focus on showing how AI technologies are built into your solutions and how they create value for your clients. For SR&ED, keep detailed records of technological uncertainties, hypotheses tested, and your systematic approach to problem-solving. 

Portfolio Approach 

The most successful companies will take a portfolio approach, balancing projects across both programs. Consider structuring your R&D to capture both experimental development (SR&ED) and AI implementation (CDAEIA). 

Looking Ahead 

Quebec’s move to CDAEIA is part of a bigger trend toward targeted, high-value tech incentives. Companies that focus on both AI innovation and real-world business applications will be best positioned to take advantage of these changes. 

The combination of enhanced SR&ED benefits and the new CDAEIA program creates unique opportunities for Canadian tech companies. By understanding the strategic differences between these programs and aligning them with your company’s stage and activities, you can maximize government funding and accelerate your innovation. 

As the funding landscape evolves, staying up to date on program changes and keeping your projects flexible will be key to long-term success. The shift from CDAE to CDAEIA isn't just about meeting new requirements—it's about embracing Quebec's vision for an AI-powered future. 

 

Ready to optimize your government funding strategy? Navigating the details of CDAEIA, SR&ED, and other innovation programs takes specialized expertise. Consider working with funding experts who can help you make the most of these programs and stay compliant as requirements evolve.