2026 tax changes: What’s new for SMEs in Quebec

At a Glance. In 2026, several factors will change for Quebec SMEs: the federal tax rate for the first individual income tax bracket will be 14% for the entire year (compared to 15% prior to July 2025), the increase in the capital gains inclusion rate is reversed (it remains at 50%), the enhanced SR&ED credit (35%) sees its spending limit raised to $6 million, and Quebec’s new CRIC credit (30% refundable) enters its first full fiscal year. Key figures remain stable: a combined tax rate of 12.2% on the first $500,000 for an eligible SME, a 5% GST, and a 9.975% QST.

Every year, the federal and Quebec budgets shift the pieces on the tax chessboard for SMEs, and 2026 is no exception: a reduction in a federal tax rate, an overhaul of research credits on both fronts, the confirmed cancellation of the capital gains tax increase, and new investment incentives. This overview compiles the quantified changes that will concretely affect incorporated businesses and self-employed individuals in Quebec, including their impact on payroll, T2 (CRA) and CO-17 (Revenu Québec) returns, and year-end planning. It complements our Checklist for the 2026 Tax Season in Quebec.

What’s changing at the federal level in 2026

Five federal changes deserve the attention of Quebec SMEs this year. The table below summarizes the situation before and after the changes, as well as their concrete impact on your business.

The most noticeable change remains the 14% rate on the first tax bracket for individuals: announced in May 2025 and effective July 1, 2025, it applies for a full year for the first time in 2026. For an executive who pays himself a salary, this means a slight reduction in personal taxes; for the employer, it primarily means updated source deductions (DAS) starting with the first paycheck in January and TD1 forms that need to be updated.

On the investment front, the federal budget of November 4, 2025, proposes 100% immediate capitalization for eligible manufacturing and processing buildings and reduces the accelerated investment incentive for most other assets: the first-year deduction becomes significantly more generous again. An SME planning to purchase equipment should therefore consult with its accountant to determine the optimal timing for the purchase.

What’s changing in Quebec in 2026

Quebec’s major initiative is the overhaul of innovation tax credits, which began with the March 25, 2025, budget. For most SMEs with a fiscal year that follows the calendar year, 2026 is the first full year under the new rules.

• The CRIC is officially taking effect. The tax credit for research, innovation, and commercialization replaces the former Quebec SR&ED credits for fiscal years beginning after March 25, 2025: 30% refundable on the first $1 million of eligible expenses above an exclusion threshold of at least $50,000, then 20% on the amount above that threshold. Notable change: pre-commercialization expenses are now eligible.
• The CDAE continues its transition. The e-business development credit maintains a total rate of 30% of eligible IT salaries, but the refundable portion will decrease by one percentage point per year starting in 2025 in favour of the non-refundable portion, and an exclusion threshold applies per employee. A tech-based SME operating at a loss will therefore receive slightly less cash than before for the same credit.
• The C3i remains on track. The Investment and Innovation Tax Credit covers up to 25% of certain eligible investments (manufacturing equipment, computer hardware, and management software packages).
• Capital Gains: Quebec Follows the Federal Government’s Lead. Revenu Québec is aligning with the cancellation of the rate increase: the inclusion rate remains at 50% at the provincial level as well.
• Payroll and Withholdings: Indexation as of January 1. Revenu Québec’s tax and withholding tables are indexed, and QPP contribution ceilings are increasing: the contribution rate remains at 6.40% for the employee and the same for the employer up to the first threshold (MGA), plus 4% each between the MGA and the second threshold (MSGA, set at 114% of the MGA).

For rates, thresholds, and pitfalls when claiming each credit, see our 2026 Table of Tax Credits for SMEs in Quebec.

Your stable guidelines for 2026

A thorough tax review also highlights what remains unchanged. These parameters, which many business leaders double-check every year, will remain in place in 2026.

How the GST and QST work (registration threshold of $30,000, ITC and ITR, production frequency) is detailed in our GST/QST Guide for Businesses in Quebec.

The practical impact based on your situation

Beyond the announcements, here’s how these changes will affect your SME depending on its profile.

• You have employees. The combination of a “14% federal tax rate for the full year + indexed QPP contribution limits” requires an update to source deductions starting in January. Budget for a slight increase in payroll costs for salaries above the MGA, and verify that your payroll software or provider is correctly applying the 2026 tables from the CRA and Revenu Québec.
• You’re investing in equipment or a building. Between the return of the accelerated investment incentive and the proposed immediate expense deduction for manufacturing buildings, the order and timing of your acquisitions will affect your tax bill. The timing of a purchase becomes a tax decision, not just an operational one.
• You’re involved in R&D or the digital sector. The federal SR&ED cap has doubled to $6 million, the CRIC rate is 30% in Quebec, and the CDAE is in transition: recoverable amounts are increasing for most businesses, but the calculation rules are changing. Claims are filed on Form T2 and Form CO-17, using prescribed forms and adhering to strict deadlines.

Keeping track of these changes is part of a good accountant’s job, not yours. Budget-wise: The typical Quebec SME spends about $3,000 per year on accounting, with most engagements ranging from $500 to $6,000 depending on the service and volume. Based on actual fees from 1,248 engagements secured through Bankeo (2024-2026), out of more than 15,000 requests received; the Bankeo Fee Barometer provides a breakdown of these ranges by service and by sector. You can also browse the Vetted accountants in the Bankeo network to compare profiles.

The 2026 calendar: Dates to mark on your calendar

• End of February: Preparing T4 slips and RL-1 forms for your employees.
• April 30: Individuals’ T1 and TP1 tax returns and payment of any balance due.
• June 15: Deadline for T1 and TP1 tax returns for self-employed individuals (the balance is due on April 30).
• Six months after the end of the fiscal year: Filing the company’s T2 and CO-17 returns; however, the tax balance is due 2 months after the end of the fiscal year (3 months for certain eligible CCPCs).
• Based on your frequency: Monthly, quarterly, or annual GST/QST returns, with estimated payments where applicable.
• Throughout the year: Tax instalments if your balances from previous years trigger them.

Frequently asked questions

What will be the tax rate for an incorporated SME in Quebec in 2026?

An SME eligible for the SME deduction pays approximately 12.2% in combined taxes (9% federal + Quebec 3.2%) on the first $500,000 of taxable income, provided, among other things, that it meets the Quebec criterion of 5,500 paid hours. Above that threshold, or without the SBD, the general combined tax rate is 26.5%.

Will the capital gains inclusion rate increase in 2026?

No. The increase to 66.7% announced in 2024 was rescinded in March 2025: the inclusion rate remains at 50%, both federally and in Quebec. The $1.25 million cumulative exemption on eligible small-business shares is maintained, and its indexation resumes in 2026, a key point to consider if you’re preparing to sell your business.

What is the CRIC, and who is eligible to claim it?

The CRIC is Quebec’s new tax credit for research, innovation, and commercialization. It replaces the former R&D credits for fiscal years beginning after March 25, 2025: 30% refundable on the first $1 million of eligible expenses above an exclusion threshold of at least $50,000, then 20% on the amount above that, with pre-commercialization expenses now eligible. It is claimed on Form CO-17 filed with Revenu Québec.

Why are my source deductions changing in January 2026?

Because the federal and Quebec withholding tables are being updated as of January 1, 2026: the federal rate for the first income bracket will be 14% for the entire year, and the QPP contribution ceilings will be indexed. Employers and payroll software providers must apply the new tables starting with the first payroll in January, and TD1 forms need to be revalidated.

Will the GST and QST change in 2026?

No. The GST remains at 5% and the QST at 9.975%, for a combined rate of 14.975% on most taxable sales in Quebec. The small supplier threshold remains at $30,000 in taxable sales over four consecutive calendar quarters: above this amount, registration with both tax registries is mandatory.

How much does it cost to hire an accountant to keep my SME up to date on these changes?

The typical Quebec SME spends about $3,000 per year on accounting services, with most engagements ranging from $500 to $6,000 depending on the service and industry. Based on actual fees from 1,248 engagements secured through Bankeo (2024-2026), out of more than 15,000 requests received. The Bankeo Fee Barometer breaks down these ranges by department.

Official sources

1. Canada Revenue Agency, Corporate Income Tax
2. Canada Revenue Agency, Scientific Research and Experimental Development (SR&ED) Program
3. Canada Revenue Agency, Payroll Withholdings
4. Revenu Québec, Employer Withholdings and Contributions
5. Ordre des CPA du Québec