Quebec Budget 2025–2026: Focusing on innovation to withstand crises

As Quebec—and Canada—face an unprecedented trade war with the United States, the Quebec government is banking on innovation and sweeping tax reform to support local businesses with its 2025–2026 budget, entitledPour un Québec fort (For a Strong Quebec).

Underlying this crisis caused by the actions of our southern neighbors, these measures, aimed at increasing the success of Quebec businesses, also seek to boost government revenues and, ultimately, reduce the significant deficit for this fiscal year—a symptom of another crisis: that of public finances.

In this summary of a budget heavily focused on the economy and innovation, here are four key elements that will have a direct impact on innovative entrepreneurship in Quebec.

The main measure underpinning the $5.4 billion investment in the Quebec economy concerns transitional assistance in the form of loans, representing a considerable injection of cash. The budget also provides for harmonization with the federal government on depreciation allowances for acquisitions that improve business productivity.

Another major initiative is a $900 million direct aid package, paid out via the Economic Development Fund, to promote automation, robotization, digital transformation, and the integration of artificial intelligence in local businesses.

In addition, there is a clear desire to diversify export markets through several key measures, including increased support for ORPEX (regional export promotion organizations), the rollout of Quebec's new international policy, and a reform of LOJIQ's governance to improve mobility opportunities for young people.

These investments are in addition to the actions taken byInvestissement Québec and CDPQ to stimulate productivity or make strategic pivots toward new markets.

In terms of entrepreneurship, certain details remain to be clarified regarding the implementation of the 2025-2028 SME Plan, which will receive a reduced budget of $44 million over three years—a significant decrease compared to the last PQE. It will also be necessary to closely monitor the deployment of the new $200 million investment fund, which will replace Impulsion PME.

Beyond support for companies affected by the trade war, the most significant measure in terms of innovation is the abolition of eight tax credits related to research, development, and innovation, in favor of a new unified tax credit: the Research, Innovation and Commercialization Tax Credit (RICC). This reform is based on the recommendations of the Quebec Innovation Council.

This reform sends a clear message to businesses that the government wants to simplify the process of accessing tax credits and expand their scope to include businesses in the pre-commercialization phase. The CRIC is also the second measure in a simplified tax assistance program that joins the Incentive Deduction for the Commercialization of Innovations (DICI), already in effect since 2021, with the goal of encouraging the retention and valuation of IP assets.
Although this reform must still be adopted by businesses, the signal is positive. It aims to make R&D a real lever for Quebec to catch up with other Canadian provinces in terms of innovation.

In addition to the CRIC, a pivot is coming for the tax credit for the development of electronic business (CDAE), which is becoming the^CDAEIA in order to encourage higher value-added IT activities and focus tax assistance in the IT field on artificial intelligence, promoting its wider adoption by Quebec businesses.

The 2025-2026 budget also contains targeted measures for strategic sectors or to support key organizations.

Support for the Technum Québec innovation zone, although conditional on federal and private investment, signals the province's desire to position itself at the forefront of digital technology in key sectors such as microelectronics and its applications in aerospace and advanced manufacturing. Similarly, the renewal of the Québec Life Sciences Strategy and support for collaborative research in sectors such as artificial intelligence, through financial support for MILA, microelectronics, and the battery industry, reflect a clear vision: to strengthen the links between research, innovation, and concrete economic benefits. Additional financial support for Finance Montréal should also be noted, particularly to increase the visibility of sustainable finance initiatives.

Several measures aim to bring more automation to the government's own processes in order to improve the efficiency of public services, but it is questionable whether the civil service will seek outside expertise after the recent setbacks with SAAQclic.

Finally, the budget also pays special attention to the regions through investments in connectivity, the social economy, local economic development, forestry, tourism, and sustainable agriculture. A budget of $225 million will also be allocated to the implementation of a new Bio-Food Policy aimed at increasing the sector's productivity and stimulating innovation.

On the side of the Department of Economy, Innovation, and Energy (MEIE), the 2025-2026 budget reflects a summary reduction in the civil service, as is the case with several other departments.

But it is mainly the decrease in financial transfers to non-profit organizations that is attracting attention: these transfers are falling from $399 million to $257 million. The message is clear for non-profits involved in economic development: it is high time to review their business model and diversify their sources of revenue.

Other notable reductions in various program expenditures:

• Regional economic development and entrepreneurship: decreasing from $256 million in 2023–2024 to $153 million in 2025–2026.
• Support for organizations and projects: from $202 million to $155.8 million between 2024–2025 and 2025–2026
• Support for the next generation and scientific culture: $25.9 million to $22.4 million
• Support for innovation research infrastructure: $11.7 million to $10.9 million

In its 2025-2026 budget, the Quebec government clearly states its economic priorities, despite limited financial resources: promoting innovation, supporting entrepreneurship, and strengthening regional development. Several key measures aim to create a more dynamic environment for businesses, particularly those operating in strategic sectors and cutting-edge technologies.

We will remain vigilant regarding the implementation of the measures outlined in this ambitious budget in terms of the economy and tax reform, especially since most of the amounts announced are planned for the (election) year 2026-2027.