In recent years, the digitalization of processes and the adoption of increasingly moder sales models have brought significant changes to commercial relationships, and e-business, as we know the process of incorporating the internet and other forms of network technologies into its main businesses, began to benefit not only large companies, but also small and medium-sized companies.

E-business, or electronic business, defines a broad set of business processes, including electronic order processing, supply chain and customer relationship management, designed to help businesses operate more effectively and efficiently. It is a growing trend that has taken up more space in companies, which use digital services to support a series of functions and capabilities.

The Quebec E-business Program

With the aim of consolidating the information technology (IT) sector and offering specialized services to Quebec companies that wish to improve their productivity by integrating it to their business processes, the E-Business Development Tax Credit (“CDAE”, as in French-language abbreviation) was created to provide financial assistance to specialized companies that develop innovative activities with high added value in the IT, mainly in the areas of computer systems design and software publishing. This government assistance allows companies that develop or integrate e-business solutions or related technology infrastructures to receive a 24% refundable and a 6% non-refundable (for a total of 30%) tax credit on the first $83.333 of an eligible employee’s salary (for a maximum of $20.000 in refundable credits and $5.000 in non-refundable credits per employee).

Eligibility

To qualify to the CDAE credit, a company must attend to these criteria:

• At least 75% of its gross revenues must come from the IT sector, and at least 50% from activities covered by North American Industry Classification System (NAICS) codes 541514, 541515, 511211, 511212 and, under certain conditions, 561320 and 561330;
• At least 75% of its gross revenues for activities covered by NAICS codes 541514, 541515, 511211, 511212, 561320 and 561330 are for services provided to persons with whom it is at arm’s length, or for services related to applications used exclusively outside Quebec;
• It must maintain at least six eligible employees throughout the fiscal year. An eligible employee is one who spends at least 75% of their time working on eligible activities, works at least 26 hours per week, and is hired for a minimum period of 40 weeks;
• The corporation must obtain an eligibility certificate for the corporation, referred to as a “corporation certificate,” and a certificate for each of the employees in respect of whom it is applying for a tax credit, referred to as an “employee certificate,” both from Investissement Québec. These certificates must be obtained for each fiscal year for which the corporation wishes to obtain the tax credit.

The credit application and its calculation are made at the end of the fiscal year when the company submits its income to Revenu Quebec. Also, this tax credit for the development of e-business can be combined with R&D incentives and other tax credits to maximize your reimbursements.

Evolution for tax year beginning in 2025

In the Quebec 2024-25 budget announcement, the government revealed changes to the E-Business Tax credit (CDAE), in order to incentivize the hiring and retention of senior-level IT employees in Quebec and the generation of additional taxable income in Quebec. These changes will apply for tax years beginning after December 31, 2024:

• Incentivize hiring and retention of senior-level IT employees: the annual $83,333 salary limitation is removed and an exclusion threshold equal to the basic personal amount under the personal income tax system is included.
• Incentivize generation of additional taxable income: the refundable portion of the credit will decrease by one point of percentage each year, while the non-refundable portion will increase by the same amount each year until 2028. From that date, the refundable rate will remain at 20% and the non-refundable rate at 10%.

The 30% rate for qualified salaries will remain unchanged for CDAE purposes, as well as the eligibility criteria for the company and the employees.

How can we help you?

FI Group is a global tax consultancy that helps industry obtain tax credits and incentives, with more than 1,800 qualified employees, counting on specialists from different fields, committed to supporting companies of all sizes and in all sectors of activities. With our expertise, FI Group specialists can support your company in identifying qualified activities. We specialize in helping companies finance innovation and secure funding for their R&D activities through the comprehensive management of the R&D Tax Credit and the e-Business Development Tax Credit (CDAE).