2026-2027 Quebec Budget

Written by Mackenzie Tax and Estate Planning Team

A responsible budget with targeted measures for Quebecers

The Québec 2026–2027 budget is presented in a context where uncertainty remains a defining feature of the economic environment. Ongoing geopolitical tensions, evolving trade and tariff policies and the transformation of global trade continue to exert pressure on economies, particularly those, such as Québec, that are highly open to external markets.

In this context, the budget framework is structured around several key priorities. The measures announced aim to support businesses operating in a changing economic landscape, protect Quebecers’ purchasing power and ensure the funding of public services, while maintaining the sound management of public finances.

The planned initiatives rely on targeted measures and strategic investments. Over a six-year horizon, nearly $9.6 billion is allocated to support businesses, the government’s main mission, and Quebecers. This is complemented by an increase of more than $5 billion in infrastructure investments, contributing to the maintenance and development of Québec’s economic capacity over the medium term.

The budget also highlights the growing role of artificial intelligence in economic transformation. Investments in this area are expected to support productivity gains and foster the emergence of new innovation hubs, while acknowledging the risk that financial markets may anticipate these benefits more rapidly than they materialize.

From a public finance perspective, projections indicate a gradual reduction of the deficit in the coming years, with a return to a balanced budget expected by 2029–2030. A contingency reserve of $8 billion is also maintained to address economic uncertainty and preserve flexibility.

Personal tax measures

Automated income tax filing for certain low-income individuals

The budget introduces a mechanism allowing Revenue Québec to automatically prepare income tax returns for certain low-income individuals, primarily to improve access to refundable tax credits.

This measure targets individuals with simple and stable tax situations who have not filed their returns within the prescribed deadlines. Despite measures implemented in recent years, some taxpayers still do not file returns, thereby foregoing benefits such as the solidarity tax credit, the work premium and certain supports for seniors.

As of the 2026 taxation year, Revenue Québec may transmit available tax information to eligible individuals and provide a period for validation or correction. In the absence of a response, the return may be filed and a notice of assessment issued under standard rules.

Taxpayer rights are maintained, including objection and appeal rights, and individuals may opt out prior to the issuance of the notice of assessment. This measure is intended to improve access to tax assistance for vulnerable populations.

Enhancements to the Voluntary Retirement Savings Plan (VRSP)

The budget introduces adjustments to the Voluntary Retirement Savings Plan (VRSP) to improve accessibility and enhance its attractiveness, in a context where its uptake remains limited.

The main changes include:

• Introduction of a minimum contribution rate of 2% of salary.
• Ability to close certain inactive accounts.
• Increase of the management fee cap to 1.50% (before QST) for existing options.
• Administrative simplification, including lighter contribution monitoring and clearer expectations for administrators.
• Greater flexibility for employers, including:
  • Annual enrolment of employees with less than one year of service.
  • Replacement of certain follow-up obligations with standardized annual communication.
  • Enhanced framework for employment termination situations.
• Introduction of new investment options requiring a minimum employer contribution of 2%, with fees of up to 1.75% (before QST).

It is also indicated that further consideration will be given to the evolution of the plan, including its structure and employer compliance oversight.

For reference, the VRSP differs from a group RRSP, which generally offers greater administrative flexibility and a broader range of investment options.

Corporate tax measures

Adjustments made to tax credits for the development of e-business integrating artificial intelligence functionalities

Québec tax assistance for the development of e-business consists of a refundable tax credit introduced in the March 13, 2008, budget speech and a non-refundable tax credit introduced in the March 26, 2015, budget speech (hereinafter referred to as the “TCEB”).

As part of the March 25, 2025, budget speech, the eligible activities of the TCEB were modernized to focus on higher value-added activities, namely those primarily related to e-businesses integrating artificial intelligence functionalities to a significant extent. The TCEB was then renamed the “refundable tax credit for the development of e-businesses integrating artificial intelligence functionalities” and the “non-refundable tax credit for the development of e-businesses integrating artificial intelligence functionalities” (hereinafter referred to as the “TCEBAI”).

Briefly, the TCEBAI is calculated on the amount by which the qualified wages incurred and paid by a qualified corporation in the year for an eligible employee exceed the applicable exclusion threshold. For taxation years beginning in 2026, the applicable rates are 22% for the refundable tax credit and 8% for the non-refundable tax credit, for a combined rate of 30%. These rates are reduced by half where a significant portion of the corporation’s activities is attributable to intercompany outsourcing services, meaning services rendered primarily to related entities, particularly outside Québec.

Several adjustments are introduced to facilitate the application of the measure and improve predictability.

Certain criteria relating to eligible activities are relaxed. Preparatory work, including data analysis and preparation, may now qualify where it forms part of a project integrating artificial intelligence functionalities to a significant extent. In addition, specialized AI consulting services are included as eligible activities, even where different entities are involved in various stages of a project.

Targeted changes are also made to the carry forward of the non-refundable tax credit. This adjustment applies only to corporations holding an unused balance from a taxation year beginning before January 1, 2026, and that no longer meet the new TCEBAI criteria. For these corporations, the condition requiring entitlement to the refundable tax credit in order to carry forward that balance, is removed. This relief does not apply to new balances arising from taxation years beginning after December 31, 2025.

Clarifications are also provided regarding the rate reduction applicable to intercompany outsourcing. All revenue from services rendered to related entities outside Québec, including support and maintenance revenue, must be considered in determining whether the 50% threshold is met.

These changes generally apply to taxation years beginning after December 31, 2025.

Harmonization with immediate expensing for greenhouses

Following a federal announcement, a measure allowing immediate expensing for greenhouse investments is introduced. This measure enables producers to deduct the full cost of eligible greenhouses in the year of acquisition rather than depreciating it over time, thereby accelerating the tax benefit.

Québec intends to harmonize its tax legislation with this measure, in accordance with its general principles of integration with federal tax measures.

Implementation remains conditional on the adoption of the corresponding federal provisions. Once enacted, Québec rules will apply in accordance with the same timelines.

Other measures

Introduction of the Rénoclimat–Adaptation program

The Rénoclimat program provides financial assistance and guidance to improve the energy efficiency of residential properties.

The budget introduces a new component, Rénoclimat–Adaptation, extending the program to climate adaptation.

This component will provide financial support for work aimed at improving the resilience of homes to extreme weather events, including flood prevention measures such as backflow valves and foundation-related interventions.

Enhancement of the LogisVert Program

Hydro-Québec’s LogisVert program currently provides financial support to improve residential energy efficiency, including through the installation of heat pumps and energy-efficient equipment.

The budget announces enhancements to expand access to renters, notably through incentives for owners of multi-unit residential buildings to install heat pumps.

This measure aims to improve the energy efficiency of the rental housing stock and allow more households to benefit from energy savings.

Adjustments to disclosure mechanisms

Québec’s tax system includes mandatory and preventive disclosure mechanisms designed to identify transactions presenting a higher risk of non-compliance, particularly in the context of aggressive tax planning, meaning arrangements intended to reduce tax in a manner inconsistent with the spirit of the legislation.

These mechanisms apply to certain transactions involving confidentiality, contingent fee arrangements or contractual protection, as well as nominee arrangements.

The budget introduces adjustments to modernize administrative processes.

Requirements relating to the method of filing are removed, allowing for potential electronic filing. The obligation for tax authorities to confirm receipt is also eliminated.

In addition, the rule deeming a disclosure compliant after 120 days without follow-up is removed, allowing for more thorough review.

These changes apply to transactions initiated as of March 18, 2026.

Measures targeting the residential construction sector

In the context of efforts to combat the underground economy, meaning unreported activities intended to avoid taxation, new initiatives are introduced to improve tax compliance in the residential construction sector.

These measures will be implemented through the ACCES construction initiative, which brings together several public bodies to coordinate enforcement actions.

Key initiatives include increased on-site presence, including for residential renovation work, with occupant consent, enhanced information sharing and the development of targeted intervention strategies.

Additional efforts will also be made to support contractors, particularly to reduce errors and facilitate compliance with tax obligations.

This document may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of March 18, 2026. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

This should not be construed as legal, tax or accounting advice. This material has been prepared for information purposes only. The tax information provided in this document is general in nature and each client should consult with their own tax advisor, accountant and lawyer before pursuing any strategy described herein as each client’s individual circumstances are unique. We have endeavored to ensure the accuracy of the information provided at the time that it was written, however, should the information in this document be incorrect or incomplete or should the law or its interpretation change after the date of this document, the advice provided may be incorrect or inappropriate. There should be no expectation that the information will be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. We are not responsible for errors contained in this document or to anyone who relies on the information contained in this document. Please consult your own legal and tax advisor.