R&D, Innovation, And Pre-commercialization Tax Credit: An Opportunity For Quebec Companies
The Québec 2025 budget introduced a new strategic tax tool for innovative companies: the Refundable Tax Credit for Scientific Research and Experimental Development, Innovation and Precommercialization (CRIC).
Designed to boost research and development (R&D) activities and support precommercial initiatives, this credit can provide companies with substantial financial assistance.
Why a new tax credit?
Quebec currently offers several R&D tax credits, covering salaries, private partnership research, and university projects, among others. However, these programs have certain limitations, notably variable rates depending on company size. With the introduction of the CRIC, the government aims to simplify and enhance this approach by offering a uniform prime rate and enhanced benefits.
CRIC key points:
- Increased rate of 30%: Applicable on the first million dollars of eligible expenses.
- Basic rate of 20%: On excess expenses.
Greater accessibility: The higher rate is available regardless of company size or assets
Who can benefit from CRIC?
CRIC is open to companies operating a business in Quebec and carrying out R&D activities. Individuals, trusts and certain public corporations are excluded.
Eligible companies include those that:
- Directly carry out R&D or pre-commercialization activities in Quebec.
- Subcontract these activities to local partners.
Research & Development
- Development or improvement of products, processes, or technologies.
- Prototyping and feasibility testing.
Pre-marketing
- Product design and improvement.
- Regulatory testing and certification.
- Industrial design and packaging.
- Market studies required for marketing.
Eligible expenses
Companies can declare several categories of expenses:
- Salaries of R&D employees located in Quebec.
- Subcontracting to Quebec-based companies.
- Payments to research centers and universities.
- Capital expenditures for the purchase of new assets used exclusively for eligible activities for at least two years.
To be eligible for CRIC, your work must be recognized as R&D by the federal government, according to a harmonized definition.
In addition, to be eligible for the pre-commercialization component of the credit, activities carried out at this stage must result directly from eligible R&D work.
The exclusion threshold and its calculation
To be eligible for CRIC, a company must exceed an exclusion threshold, determined according to two criteria:
- $50,000 minimum.
- An amount calculated on the basis of the number of employees involved in R&D or pre-marketing activities.
The credit is then calculated on the excess of eligible expenses over this threshold.
Please note that the CRIC is in effect for fiscal years beginning after March 25, 2025.
Significant support for innovation
CRIC reflects the Quebec government’s commitment to encouraging innovation and boosting the competitiveness of local businesses. By reducing the financial pressure associated with research and pre-commercialization, this program aims to enable a greater number of companies to dare to innovate and bring their products to market more quickly.
Points to watch:
- The exclusion threshold can limit access to credit.
- Government assistance received reduces eligible expenses.
- Requirement to use capital property in Quebec for 730 consecutive days.
- Associated companies must share the $1 million spending limit to qualify for the 30% bonus rate.
Strategies for maximizing credit:
- Carefully document all eligible expenses.
- Identify pre-marketing activities, as this is a new era.ra
- Plan projects to minimize the impact of the applicable exclusion threshold and maximize the 30% rate on the first $1 million.
- Consider local subcontracting for eligible activities.
With the introduction of the CRIC, the Quebec government aims to provide Quebec companies with “strategic leverage” to bring their innovative projects to fruition. Whether you’re a technology SME, a manufacturing company, or a player in the life sciences sector, this tax credit could help you take a decisive step towards growth and success.
Be sure to assess your eligibility and plan your activities accordingly to maximize this financial advantage.
Article written by: Demers Beaulne S.E.N.C.R.L.