Quebec's tech ecosystem is undergoing a significant transformation, as artificial intelligence (AI) becomes the driving force behind innovation in virtually all corners of the region's economy.  

To keep pace, the provincial government is reshaping its approach to supporting technological development; specifically, repositioning and updating key qualifying criteria for Quebec's banner innovation tax credit program beginning in 2026.  

Starting with taxation years beginning after December 31, 2025, the Quebec government has decided to redirect the Tax Credit for the Development of E-Business (CDAE) towards a new tax credit integrating artificial intelligence: The CDAEIA. This shift reflects a broader commitment to supporting high-value-added activities that leverage Quebec's strengths in cutting-edge technological fields. 

Transitioning CDAE to the new AI-integrated CDAEIA represents more than just a name change; it's a strategic pivot that will fundamentally impact how Quebec tech companies access government funding. 

Understanding the CDAE to CDAEIA Evolution 

Why the Change? 

Since its creation in 2008, the CDAE has supported activities related to the design and development of computer systems and software. However, recent technological advances(particularly in the field of AI) have transformed services and solutions in IT. Some activities supported by the CDAE no longer represent high added value in the service offerings of specialized IT companies. 

The CDAEIA isn't just an update; it's a complete reimagining of how Quebec supports tech innovation. While the CDAE cast a wide net over general e-business development, the CDAEIA specifically targets companies that are pushing the boundaries of AI integration. 

What Qualifies Under CDAEIA? 

Activities eligible for the CDAEIA must be closely related to information system design or software publishing and significantly integrate AI functionalities. The government defines AI solutions as applications or software using advanced technologies such as machine learning and neural networks to accomplish specific tasks, automate business processes, analyze large amounts of data, and provide personalized customer experiences. 

Importantly, maintenance and evolution activities of information systems and technological infrastructures will no longer be eligible, even if they are ancillary to the main activities. This restriction signals Quebec's commitment to funding truly innovative, forward-looking projects rather than routine IT maintenance. 

Key Changes in Eligibility and Benefits 

Enhanced Revenue Criteria 

The CDAEIA introduces more sophisticated revenue criteria that better reflect modern AI business models. The new gross revenue criteria will be adapted to better match the business models of companies specializing in artificial intelligence (AI), where a significant portion of revenue may come from hosting or data processing. 

Evolving Tax Credit Structure 

While the overall tax aid rate remains at 30%, the distribution is changing 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 shift reflects the government's long-term strategy to balance immediate cash flow support with sustainable tax policy. 

Refined Employee Requirements 

Companies must maintain at least six eligible full-time employees, with each devoting at least 75% of their working time to eligible AI-related activities. Only labor expenses that exceed this threshold will be considered eligible, where the exclusion threshold corresponds to the basic personal amount of the individual tax system. 

Strategic Considerations: CDAEIA vs. SR&ED 

For Canadian tech companies, understanding when to leverage CDAEIA versus the federal SR&ED program is crucial for maximizing funding opportunities. Recent updates to both programs create new strategic considerations. 

SR&ED Program Updates for 2025 

The federal government has significantly enhanced the SR&ED program with changes effective for taxation years beginning after December 16, 2024: 

  • Increase the expenditure limit on which the enhanced 35 per cent rate can be earned from $3 million to $4.5 million 
  • Extend eligibility for the enhanced 35 per cent refundable tax credit to eligible Canadian public corporations 
  • Restore the eligibility of capital expenditures for both the deduction against income and investment tax credit components of the SR&ED program 

When to Choose CDAEIA vs. SR&ED 

The decision between CDAEIA and SR&ED isn't mutually exclusive—many companies can benefit from both programs simultaneously. Here's how to think strategically about each: 

Choose CDAEIA when: 

  • Your company is Quebec-based with significant AI integration activities 
  • You're developing or implementing AI-powered business solutions 
  • Your work involves creating AI applications that automate processes or provide data-driven insights 
  • You need funding for ongoing AI development activities rather than experimental research 

Choose SR&ED when: 

  • Your work involves technological uncertainty and systematic investigation 
  • You're conducting experimental development to overcome technical challenges 
  • You're engaged in applied research or basic research activities 
  • You need to resolve specific technological problems through experimentation 

Leverage Both Programs when: 

  • You're a Quebec-based company conducting both AI implementation and R&D activities 
  • Your AI development work involves experimental research to overcome technological uncertainties 
  • You have both routine AI development activities and breakthrough research projects 

Lifecycle Strategy: Maximizing Government Funding Through Company Growth Stages 

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

At this stage, companies typically benefit most from SR&ED due to the experimental nature of their work. Early-stage companies are often solving fundamental technological challenges and developing proof-of-concept solutions. The enhanced SR&ED expenditure limits (now up to $4.5 million for the 35% refundable credit) provide substantial support during these capital-intensive research phases. 

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

As companies mature and begin implementing proven AI technologies into business solutions, CDAEIA becomes increasingly valuable. These companies often have established AI development teams working on productized solutions rather than experimental research. The combination of CDAEIA for implementation activities and SR&ED for continued R&D creates a powerful funding portfolio. 

Mature Companies ($10M+ Revenue) 

Larger companies can leverage both programs strategically, using CDAEIA for their Quebec-based AI development operations while claiming SR&ED for experimental development activities. With the restored capital expenditure eligibility in SR&ED, these companies can also claim credits on significant equipment investments. 

Implementation Timeline and Preparation 

2025: Transition Year 

Companies should begin preparing for the CDAEIA transition by: 

  • Documenting AI integration in current projects 
  • Identifying which activities will qualify under the new criteria 
  • Developing systems to track AI-specific development activities 
  • Training finance and project management teams on new requirements 

2026 and Beyond: Full Implementation 

The CDAEIA aims to create a more favorable business environment for innovation by simplifying and making the tax aid system more efficient. The changes will provide additional financial support totaling $271.5 million over five years. 

Maximizing Your Strategic Position 

Documentation Best Practices 

Success with both CDAEIA and SR&ED requires meticulous documentation. For CDAEIA, focus on demonstrating how AI technologies are integrated into your solutions and how they create value for clients. For SR&ED, maintain detailed records of technological uncertainties, hypotheses tested, and systematic approaches to problem-solving. 

Portfolio Approach 

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

Looking Forward 

Quebec's transition to CDAEIA signals a broader trend toward specialized, high-value technology incentives. Companies that position themselves at the intersection of AI innovation and practical business applications will be best positioned to benefit from this evolving landscape. 

The integration of enhanced SR&ED benefits with the new CDAEIA program creates unprecedented opportunities for Canadian tech companies. By understanding the strategic differences between these programs and aligning them with your company's growth stage and activities, you can maximize government funding while driving innovation forward. 

As the funding landscape continues to evolve, staying informed about program changes and maintaining flexible project structures will be key to long-term success. The transition from CDAE to CDAEIA isn't just about adapting to new requirements—it's about embracing Quebec's vision for an AI-powered technological future. 

 

Ready to optimize your government funding strategy? Understanding the nuances of CDAEIA, SR&ED, and other innovation programs requires specialized expertise. Consider consulting with funding specialists who can help you navigate these programs and maximize your benefits while ensuring compliance with evolving requirements.