Tax changes for 2026: what's changing for SMEs

In short , several parameters change for Quebec SMEs in 2026: the federal personal income tax rate is 14% for the entire year (compared to 15% before July 2025), the increase in the capital gains inclusion rate is cancelled (it remains at 50%), the SR&ED tax credit, increased to 35%, has its spending cap raised to $6 million, and the new Quebec CRIC (30% refundable) is in its first full year. The benchmarks remain stable: a combined tax rate of 12.2% on the first $500,000 for an eligible SME, and sales tax rates of 5% and 9.975%.

Each year, the federal and Quebec budgets shift the pieces on the tax chessboard for SMEs, and 2026 is no exception: a federal rate cut, an overhaul of research tax credits on both sides, the confirmed cancellation of the capital gains increase, and new investment incentives. This overview compiles the specific figures that directly affect an incorporated business or a self-employed individual in Quebec, along with their impact on payroll, T2 (CRA) and CO-17 (Revenu Québec) returns, and year-end planning. It complements our 2026 Quebec tax season checklist .

What will change at the federal level in 2026

Five federal initiatives deserve the attention of Quebec SMEs this year. The following table summarizes the before, after, and actual impact on your business.

The most visible change remains the 14% rate on the first tax bracket for individuals: announced in May 2025 and effective from July 1, 2025, it applies for a full year for the first time in 2026. For a manager who pays himself a salary, this means a slightly reduced personal tax; for the employer, it mainly means updated withholding tables (DAS) from the first paycheck in January and TD1 forms to be revalidated.

On the investment front, the federal budget of November 4, 2025, proposes immediate 100% cost-saving for eligible manufacturing and processing buildings and reinstates the incentive for accelerated investment for most other assets: the first-year deduction becomes significantly more generous. Therefore, SMEs planning equipment purchases should consult their accountant to determine the optimal time for acquisition.

What will change in Quebec in 2026

The major French project is the overhaul of innovation tax credits initiated in the budget of March 25, 2025. For most SMEs whose financial year follows the calendar year, 2026 is the first full year under the new rules.

• The Research, Innovation and Commercialization Tax Credit (CRIC) is now fully in effect. It replaces the former Quebec R&D tax credits for fiscal years beginning after March 25, 2025: 30% refundable on the first $1 million of eligible expenses exceeding an exclusion threshold of at least $50,000, and then 20% thereafter. A notable new feature: pre-commercialization expenses are now eligible.
• The CDAE (E-Business Development Tax Credit) is continuing its transition. The tax credit for e-business development maintains a total rate of 30% of eligible IT salaries, but the repayable portion decreases by one percentage point per year from 2025 onwards, in favor of the non-repayable portion, and an exclusion threshold applies per employee. A loss-making technology SME therefore receives slightly less money than before for the same tax credit.
• The C3i remains available. The tax credit for investment and innovation covers up to 25% of certain eligible investments (manufacturing equipment, computer equipment, management software packages).
• Capital gains: Quebec follows the federal government. Revenu Québec aligns itself with the cancellation of the increase: the inclusion rate remains at 50% provincially as well.
• Payroll and deductions: indexed on January 1st. The income tax and deduction tables are indexed, and the QPP ceilings increase: the contribution remains at 6.40% for the employee and the same for the employer up to the first ceiling (MGA), plus 4% each between the MGA and the second ceiling (MSGA, set at 114% of the MGA).

For rates, thresholds and claim pitfalls for each credit, see our 2026 table of tax credits for SMEs in Quebec .

Your stable benchmarks in 2026

A thorough tax audit also reveals what remains unchanged. These parameters, which many executives review annually, will remain in place in 2026.

The operation of the GST and QST (registration at the $30,000 threshold, ITC and IRT, production frequencies) is detailed in our GST-QST guide for businesses in Quebec .

The concrete impact depending on your situation

Beyond the announcements, here's how these new features translate depending on the profile of your SME.

• You employ staff. The combination of a 14% federal tax rate for the full year and indexed QPP contribution ceilings requires an update to your payroll declarations (DAS) starting in January. Budget for a slight increase in payroll costs for salaries above the maximum guaranteed minimum wage (MGA), and verify that your software or payroll provider correctly applies the CRA and Revenu Québec 2026 tables.
• You invest in equipment or buildings. Between the return of the accelerated investment incentive and the immediate expense deduction offered for manufacturing buildings, the order and date of your acquisitions affect your tax bill. The timing of the purchase becomes a tax decision, not just an operational one.
• You're involved in R&D or digital technology. The SR&ED cap has doubled to $6 million federally, the CRIC (Canadian Research and Innovation Contribution) is at 30% in Quebec, and the CDAE (Canadian Development and Economic Activity Tax Credit) is in transition: the recoverable amounts are increasing for most profiles, but the calculation rules are changing. Claims are made using T2 and CO-17 slips, with prescribed forms and strict deadlines.

Suivre ces changements fait partie du travail d'un bon comptable, pas du vôtre. Côté budget : la PME québécoise type consacre environ 3 000 $ par année à sa comptabilité, la plupart des mandats se situant entre 500 et 6 000 $ selon le service et le volume. Basé sur les honoraires réels de 1 248 mandats conclus via Bankeo (2024-2026), sur plus de 15 000 demandes reçues; le Baromètre Bankeo détaille ces fourchettes par service et par secteur. Vous pouvez aussi parcourir les comptables vérifiés du réseau Bankeo pour comparer les profils.

The 2026 calendar to add to your diary

• End of February: production of T4 slips and Relevé 1 for your employees.
• April 30: T1 and TP1 declarations for individuals and payment of any outstanding balance.
• June 15: Deadline for T1 and TP1 declarations for self-employed individuals (the remaining balance due on April 30).
• 6 months after closing: filing of the company's T2 and CO-17 returns; however, the tax balance is paid 2 months after the end of the fiscal year (3 months for several eligible SPCCs).
• Depending on your frequency: monthly, quarterly or annual VAT returns, with advance payments where applicable.
• All year round: provisional tax payments if your balances from previous years trigger it.

Frequently asked questions

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

An SME eligible for the small business deduction pays approximately 12.2% combined tax (federal 9% + Quebec 3.2%) on its first $500,000 of taxable income, provided it meets the Quebec requirement of 5,500 paid hours. Beyond that threshold, or without the small business deduction, the overall combined rate is 26.5%.

Will the capital gains inclusion rate increase in 2026?

No. The increase to 66.7% announced for 2024 was cancelled in March 2025: the inclusion rate remains at 50%, both federally and in Quebec. The cumulative exemption of €1.25 million on eligible small business shares is maintained, and its indexation will resume in 2026—a key point if you are preparing to sell your business.

What is the CRIC and who can 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 exceeding an exclusion threshold of at least $50,000, and then 20% beyond that threshold, with pre-commercialization expenses now eligible. It is claimed on form CO-17 filed with Revenu Québec.

Why are my withholding taxes changing in January 2026?

Because the federal and Quebec withholding tax tables are being updated on January 1, 2026: the federal rate for the first tax bracket will be 14% for the entire year, and the Quebec Pension Plan (QPP) contribution limits will be indexed. Employers and payroll software must apply the new tables starting with the first January paycheque, and TD1 forms should be reviewed and updated.

Will VAT change in 2026?

No. The GST remains at 5% and the QST at 9.975%, for a combined total 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; beyond this threshold, registration with both files is mandatory.

How much does it cost to hire an accountant to keep my small business up-to-date with these changes?

La PME québécoise type consacre environ 3 000 $ par année à sa comptabilité, la plupart des mandats se situant entre 500 et 6 000 $ selon le service et le secteur. Basé sur les honoraires réels de 1 248 mandats conclus via Bankeo (2024-2026), sur plus de 15 000 demandes reçues. Le Baromètre Bankeo détaille ces fourchettes par service.

Official sources

1. Revenue Agency of the | Canada Corporate Income Tax
2. Revenue Agency of the | Canada Scientific Research and Experimental Development (SR&ED) Program
3. Revenue Agency of the | Canada Salary deductions
4. Revenu Québec, Employer deductions and contributions;
5. Quebec CPA Order