The Tax Credit for the Development of Electronic Business (CDAE) is a tax program of the Government of Quebec intended to support companies in the field of information technologies. This tax credit, often regarded as an important Quebec IT tax credit (information technologies), aims to encourage the creation and growth of digital solutions and electronic business within Quebec companies. In simple terms, it is an incentive allowing an eligible corporation to recover part of the salaries paid to its employees assigned to digital projects. This CDAE program offers companies financial support in the form of a refundable tax credit, thereby helping to reduce the development cost of IT projects and to promote innovation. In this article, we will explain what the CDAE tax credit is, what its objectives are, and the benefits for companies that participate. We will also detail the eligibility criteria (CDAE eligibility) of the program—both for companies and for employees—as well as the steps to file an application (including the concept of the CDAE form to be completed). Finally, we will discuss the respective roles of Investissement Québec CDAE and Revenu Québec CDAE in administering this program, how it supports the development of electronic business, and we will give some concrete use cases of eligible projects.
What is the CDAE tax credit?
The Tax Credit for the Development of Electronic Business, better known under the acronym CDAE Quebec, is a refundable tax credit established to support companies operating in the electronic business and digital technologies sector. Concretely, the CDAE allows an eligible corporation to benefit from a partial reimbursement of its salary expenses related to full-time information technology jobs dedicated to electronic business development projects. Financially, the electronic business tax credit offers aid equivalent to 30 % of eligible salaries paid to eligible employees, up to an annual ceiling. This ceiling generally corresponds to a maximum eligible salary of about $83,333 per employee per year, which translates into a maximum credit of $25,000 per eligible employee annually. It should be noted that a large portion of this credit (24 % out of the 30 %) is refundable—that is, it is paid to the company even if it is not taxable or has no taxes payable. The remainder (6 %) constitutes the non-refundable portion, which serves to reduce the tax payable, if any (with the possibility of carrying forward if the entire non-refundable credit is not used immediately). Thanks to this mechanism, even young tech companies in the start-up or growth phase, which are not yet generating taxable profits, can take advantage of the program and receive direct financial assistance. In summary, the CDAE tax credit is an important financial tool for Quebec’s digital-sector companies. By easing the cost of the payroll dedicated to electronic projects (for example, software development, online solutions, e-commerce, etc.), this program helps companies invest more in innovation and the digital transformation of their electronic business. In the following sections, we will cover the objectives targeted by this tax credit and the concrete benefits it provides to eligible corporations.
Objectives of the CDAE program
The CDAE program was established with the aim of stimulating Quebec’s digital economy and strengthening the competitiveness of the province’s companies in the field of information technologies. The main objectives of the Tax Credit for the Development of Electronic Business can be summarized as follows:
- Encourage the development of electronic business: The program aims to incentivize companies to design and integrate innovative digital solutions (for example, e-commerce platforms, enterprise software, online services). By subsidizing part of the salaries of developers, programmers, analysts, and other IT experts, the government encourages companies to undertake such projects or to accelerate them.
- Stimulate innovation and digital transformation: By reducing the investment cost in technology projects, the CDAE encourages companies to innovate, adopt new technologies, and digitize their business processes. This contributes to the rise of more modern, efficient, and digitally oriented enterprises.
- Create and maintain qualified IT jobs in Quebec: Another key objective is to foster the creation of highly skilled jobs in the IT sector and to retain talent in Quebec. The electronic business tax credit makes hiring specialists (developers, software engineers, cybersecurity experts, etc.) more affordable for companies, which can translate into workforce growth and the retention of strategic positions within the province.
- Increase the competitiveness of Quebec companies: By financially assisting corporations in developing digital products and services, the program contributes to improving the competitiveness of Quebec companies on the national and international stages. Companies can more easily compete with other players by offering cutting-edge technological solutions, and the CDAE support enables them to deliver these innovations more quickly or at lower cost.
In sum, the CDAE objectives align with a digitally-focused economic development vision. Through this measure, the government seeks to propel the development of electronic business in Quebec, in partnership with private companies ready to invest in digital transformation. In the next section, we will look more concretely at the advantages companies can gain from this tax credit.
Advantages of the electronic business tax credit for companies
The CDAE tax credit offers many advantages for eligible corporations by providing tangible financial support and by facilitating the execution of their technology projects. Here are the main benefits a company can derive from this program:
- Reduction of specialized labor costs: The primary and most direct advantage is the net reduction of salary costs related to digital projects. Thanks to the reimbursement of part of the salaries (up to 30 % of eligible remuneration), a company sees its IT personnel expenses decrease significantly. This financial boost makes it easier to hire developers, analysts, or other IT experts, or to retain these talents by easing the payroll burden on the company’s budget.
- Improved cash flow and project financing: Since the CDAE tax credit is largely refundable, it can generate additional liquidity for the company. For example, even a start-up without taxable profits will receive a government cheque for the refundable portion of the credit. These funds can be reinvested in the company to continue the current project, launch new digital initiatives, or improve technological infrastructure. In other words, the CDAE contributes to financing innovation investment without increasing the company’s debt.
- Acceleration of innovation and digital transformation: By reducing the financial risk associated with technology projects, the CDAE encourages companies to innovate more. A project that might have seemed too expensive can become feasible thanks to program support. Companies can explore new ideas, develop bespoke solutions (like mobile applications, integrated information systems, data analytics tools, etc.), and adopt emerging technologies more rapidly. This Investissement Québec CDAE investment in innovation pays off by increasing the productivity and efficiency of beneficiary companies.
- Increased competitiveness and expansion: Participating companies gain a competitive edge. Indeed, they have additional resources to improve their digital products and services or to optimize internal processes through technology. Medium and long term, this can translate into higher customer satisfaction (for instance, thanks to a more performant online platform), the ability to enter new markets (by developing exportable online solutions outside Quebec), and accelerated growth. The electronic business tax credit thus acts as a catalyst for the growth and competitiveness of Quebec’s tech companies.
- Complementary support to other fiscal measures: The CDAE adds to other tax incentives offered to innovative businesses, such as the R&D tax credits (scientific research and experimental development) or the multimedia production tax credit, when applicable. Although stacking rules exist (to avoid double subsidizing the same expense), the CDAE program can often be used in parallel with other measures to maximize overall financial support. Thus, an IT company can benefit from a diversified ecosystem of fiscal aids for different aspects of its activities. The Quebec IT tax credit represented by the CDAE constitutes one of the cornerstones of this support ecosystem for innovative companies.
In summary, the CDAE tax credit provides substantial financial relief and multiple strategic advantages. Whether to hire qualified staff, launch an e-commerce project, develop new software, or integrate a technological solution within its organization, program support can make the difference by making these initiatives more accessible and profitable.
Eligibility criteria for the CDAE tax credit
Like any tax program, the CDAE is accompanied by strict conditions. The eligibility criteria (CDAE criteria) ensure that only companies and projects that meet the program’s objectives can benefit. Eligibility for the CDAE tax credit concerns both the company itself and the employees whose salaries will be claimed for the credit. Here is an overview of the main conditions to be met.
Company eligibility
To be eligible for the CDAE tax credit, a corporation must, in particular, meet the following criteria:
- Establishment in Quebec and IT sector activities: The company must operate a business in Quebec, i.e., have an establishment and carry out its activities there. Moreover, these activities must belong to the information technology sector. In practice, this means the company is involved in IT services, software development, e-commerce, systems integration, or other related IT activities. The program explicitly targets digital-sector companies.
- Significant percentage of electronic business activities: A key financial condition is that the majority of the company’s revenue comes from IT-related activities. Typically, at least 75 % of the company’s gross revenue must derive from the information technology sector. Furthermore, a more targeted proportion (e.g., 50 % of total revenue) must be attributable to specific IT development or service activities (such as software publishing, systems design, video game development, or e-commerce solutions). These percentages ensure that the applicant company is genuinely dedicated to electronic business rather than a traditional enterprise with a one-off IT project.
- Services offered to independent clients or external markets: Linked to the previous point, the program favors companies whose IT activities benefit external or out-of-province clients. Thus, for certain types of activities (e.g., software or game development), at least 75 % of these activities must be carried out either for clients with which the company has no dependency (independent clients) or for applications used outside Quebec. This requirement aims to exclude cases where a company develops solely for its own internal use or for related companies without a true commercial offering to the market.
- Minimum number of full-time employees: The company must maintain at least six (6) eligible employees throughout the taxation year in question. This full-time headcount criterion ensures that the company has sufficient scale and real engagement in electronic business development. Concretely, if the number of eligible employees drops below six at any time during the year (due to unfilled departures, for example), the company risks losing eligibility for that year’s credit. It is therefore crucial to plan human resources to maintain this threshold continuously (provisions exist for exceptional cases beyond the employer’s control, but the goal remains to have six eligible employees at all times).
- Company eligibility certificate from Investissement Québec: The company must obtain a certificate of eligibility issued by Investissement Québec confirming that it meets the program criteria for the taxation year. This CDAE company certificate, generally valid for two years, is an official document without which Revenu Québec will not grant the tax credit. Investissement Québec reviews the company’s file (activity profile, revenues, headcount, etc.) and, if all conditions are met, issues this certificate.
- Absence of excluding status: Certain entities are explicitly excluded, even if they meet the above criteria. These include tax-exempt organizations (e.g., non-profit or charitable organizations), Crown corporations and their 100 %-owned subsidiaries, and any company with a special tax status incompatible with the program (e.g., benefiting from a “large investment project” deduction from the Ministry of Finance). In other words, the CDAE tax credit is intended only for private, taxable tech-sector companies—not public or already tax-exempt entities.
Employee eligibility
Even if a company is eligible, the employees whose salaries will be claimed must also meet their own eligibility definition under the CDAE. Employee eligibility criteria include:
- Full-time employment for the year: The employee must hold a full-time position, meaning at least 26 hours per week for at least 40 weeks during the taxation year. This ensures the credit applies to regular, stable employees—not short-term contractors or very temporary staff. For the six-employee threshold mentioned above, only those who have worked full-time all year count (replacements may be tolerated if an employee leaves mid-year, provided continuity is maintained).
- Tasks related to eligible activities (75 % of time): Each eligible employee must spend at least 75 % of their working time on activities related to electronic business development. Eligible activities include system development, maintenance or evolution of IT systems, integration of technological solutions for clients or internally, technical support directly associated with these projects, development of e-commerce solutions, development of cybersecurity systems, and certain IT consulting tasks linked to these projects. Roles such as programmer, software developer, IT analyst, project manager, system architect, or cybersecurity specialist are covered, provided the bulk of the work involves creating or supporting digital solutions.
- Presence in Quebec: The employee must perform their duties in Quebec, i.e., at a company establishment located in Quebec. The program’s goal is to create value and jobs in Quebec; therefore, an employee based abroad or in another province is not eligible, even if they work for the same company.
- Employee eligibility certificate from Investissement Québec: Like the company, each eligible employee must receive an individual certificate from Investissement Québec for the relevant year. This CDAE employee certificate confirms the person meets the conditions (full-time employment, eligible functions, etc.) and is officially recognized as an eligible employee for the tax credit. Certificates must be requested alongside the company’s application and renewed annually.
- Employee status relative to the company: Restrictions apply regarding an employee’s relationship with the company. Notably, an employee who holds more than 10 % of the company’s shares is not eligible for the credit calculation. In other words, the salary of an owner or majority shareholder cannot be reimbursed via the CDAE. However—a crucial nuance—this shareholder-employee can still count toward the six-employee requirement, even though their salary is excluded from the credit calculation. This rule prevents an owner from receiving a subsidized salary while allowing the company to retain its eligibility if, for example, a key developer holds equity. Beyond shareholders, the program also ensures that the employee has no incompatible dependency (e.g., being the spouse of a significant shareholder may disqualify them under usual tax rules).
In summary, CDAE eligibility requires strict alignment of criteria on both the company and employee sides. A tech company must have a critical mass of IT positions, derive the bulk of its revenue from this sector, and obtain Investissement Québec’s approval through certificates. Each employee whose salary is claimed must indeed work mainly on eligible digital projects and be officially recognized by Investissement Québec. If all these CDAE criteria are met, the company can then proceed to the formal application with Revenu Québec.
Steps to file a CDAE tax credit application
Obtaining the CDAE tax credit is not automatic: the company must follow a multi-step application process and respect certain deadlines. Here are the main steps to file a CDAE tax credit application and ensure receipt of the assistance:
- Verify eligibility and prepare the Investissement Québec certificate application: First, the company must ensure it meets the detailed eligibility criteria (sector of activity, IT revenue percentage, eligible employees, etc.). It is often useful to carry out this assessment in advance, possibly with the help of advisors or tax experts. Once confident of meeting the conditions, the corporation must submit a certificate application to Investissement Québec. This involves completing a specific form (provided by Investissement Québec) and submitting supporting documents proving compliance (company information, lists of employees with job descriptions, financial data demonstrating the IT revenue proportion, etc.). The application must be filed no later than 15 months after the end of the targeted fiscal year (though it is recommended not to wait until the last moment, to secure the certificate in time for tax filing). Investissement Québec will review the file and, if compliant, issue the necessary certificates (one for the company, valid for two years, and one for each eligible employee, valid for the fiscal year). Administrative fees may apply.
- Complete the Revenu Québec tax credit form: Once in possession of the Investissement Québec certificates, the company can request the tax credit in its provincial tax return. It must first complete the prescribed CDAE form from Revenu Québec, namely the “Tax Credit for the Development of Electronic Business” form (number CO-1029.8.36.DA). This form requires information such as the corporation’s identity, number of eligible employees, total eligible salaries paid, the credit calculation (30 % of these salaries, applying the per-employee maximum), etc. Copies of the Investissement Québec certificates for the company and employees are usually attached. Simultaneously, in the corporate income tax return (form CO-17 in Quebec), the company must report the CDAE credit amount and the credit code (usually code 86).
- Respect the application deadline: The CDAE credit application (i.e., the completed form and required documents) must be submitted to Revenu Québec within a specific timeframe to be valid. Generally, the application is due no later than 12 months after the corporate tax return deadline for the year in question. Since a corporate return is usually due six months after fiscal year-end, this effectively gives up to 18 months after year-end to claim the credit. However, there is a second deadline: if the Investissement Québec certificate was issued late, the application may be filed up to three months after the certificate date (if that exceeds the first deadline). The company benefits from the longer of these two periods. It is strongly advised to submit the application as soon as possible once certificates are in hand to avoid missing the deadline.
- Attach documents and file the return: When filing the corporate tax return for the year, the company must include all supporting documents for the credit application. This includes the completed CDAE form, copies of all eligibility certificates, and any other prescribed documents. Revenu Québec may request additional supporting evidence if needed (e.g., pay stubs, timesheet details), especially in the event of an audit. Once the return and credit application are filed (electronically or on paper), Revenu Québec will process them.
- Follow-up and receipt of the tax credit: After reviewing the application, if all is in order, Revenu Québec will grant the tax credit. The refundable portion will be paid to the company (typically by cheque or direct deposit), and the non-refundable portion will reduce the company’s tax payable for the year (or be carried forward if unused). It is important to retain all application documents for at least the statutory record-keeping period (usually six years), as the tax authorities may audit later to verify compliance.
By following these steps, a company maximizes its chances of successfully obtaining the CDAE tax credit. Assistance from a tax advisor or government incentives specialist can be helpful given the complexity of certain criteria and the attention to detail required. Nevertheless, with diligence and by adhering to the procedures of Investissement Québec and Revenu Québec, many Quebec companies have benefited from the CDAE tax credit to support their digital projects.
Role of Investissement Québec and Revenu Québec in the CDAE program
The CDAE program involves two main public agencies, each with a well-defined role: Investissement Québec and Revenu Québec. Although it is a fiscal measure, its operation relies on collaboration between these two entities. The division of responsibilities can be summarized as follows:
- Investissement Québec – CDAE component: Investissement Québec is mandated to manage the eligibility certification aspect of the program. In other words, Investissement Québec CDAE is responsible for assessing whether companies and their employees meet the program’s eligibility criteria. Its tasks include receiving and analyzing certificate applications, verifying compliance with all program conditions (sector of activity, revenue proportions, eligible activities, headcount, etc.), and then issuing official eligibility certificates. These certificates, issued by Investissement Québec, are indispensable for Revenu Québec to grant the tax credit. Investissement Québec thus acts as the gatekeeper of program criteria: it certifies that the company truly carries out electronic business development and contributes, through its projects and jobs, to the program’s objectives. Note that Investissement Québec also provides periodic follow-up (company certificates may be renewed every two years and employee certificates annually) and offers information to interested companies via its website and client services.
- Revenu Québec – CDAE component: Revenu Québec is responsible for the fiscal administration of the tax credit. Concretely, Revenu Québec CDAE handles receipt of the credit application via the corporate tax return, processing of the CDAE form and submitted documents, and issuance of the tax credit (refund or tax reduction) once approved. Revenu Québec ensures the application is complete, that Investissement Québec certificates are present and valid, and that the credit calculation is correct based on eligible salaries. It is also Revenu Québec that may verify afterward that claimed amounts correspond to real, eligible expenses (hence the importance of keeping payroll records, timesheets, etc.). In short, Revenu Québec’s role is to integrate the program into the tax system: it finalizes the financial benefit on the company’s assessment notice and makes payment of the refundable portion.
In summary, Investissement Québec and Revenu Québec work in concert to operate the CDAE program. Investissement Québec acts upstream by validating eligibility and providing the certificates, while Revenu Québec intervenes downstream to realize the financial advantage in the company’s tax file. Companies planning to apply must interact with both agencies: first Investissement Québec to obtain approval, then Revenu Québec to receive the credit payment.
Support for the development of electronic business in Quebec
The CDAE tax credit plays a crucial role in supporting the digital transformation of Quebec companies. By reducing the cost of creating digital solutions, the program directly stimulates electronic business development across the province. Here is how this program contributes to Quebec’s digital dynamism:
First, the CDAE enables many small and medium-sized enterprises to overcome a significant financial barrier to undertaking technology projects. For example, developing a custom e-commerce platform, integrating a new cloud-based ERP system, or designing an innovative mobile application requires considerable specialized labor investment. Without assistance, these costs can deter companies from pursuing digital transformation. Thanks to the electronic business tax credit, a significant portion of these salary costs is reimbursed, lowering the break-even point and encouraging companies to proceed with the project. As a result, more companies dare to adopt e-commerce, modernize their IT systems, or create digital products for their clients.
Moreover, by financially supporting the creation of digital solutions, the CDAE program helps diffuse Quebec technologies across various economic sectors. For example, a manufacturing company may engage a CDAE-eligible software firm to develop an online order management system or a customer portal. By aiding the development firm, the tax credit indirectly reduces the project cost for the end client and facilitates technology integration in a traditional industry. Such synergy accelerates the digital transformation of Quebec’s entire economy, allowing all industries to benefit from electronic business advances.
The program also fosters healthy competition and innovation among local IT companies. Knowing they can count on government support, IT firms are incentivized to develop new offerings, innovate further, and conquer markets outside Quebec. Indeed, the CDAE credit applies to export-oriented projects (for example, a SaaS software sold worldwide from Quebec). This helps Quebec companies position themselves internationally while retaining jobs and expertise in the province. Thus, the program reinforces Quebec’s status as a hub for electronic business and software development, competitive with other tech centers.
Finally, from Quebec society’s viewpoint, the CDAE generates positive spinoffs in the form of well-paid job creation, the development of local digital expertise, and increased productivity. Employees whose positions are supported by the program gain experience on diverse projects and drive innovation forward. In the long term, this contributes to economic growth and to Quebec’s prominence in the information technology sector. The CDAE tax credit is therefore not just a fiscal expense for the state—it is an investment in the province’s digital future and in the competitiveness of its companies.
Examples of CDAE-eligible projects
To illustrate concretely how the CDAE tax credit can be used, here are some typical use cases of projects or companies that could benefit:
- Development of a custom e-commerce platform: Imagine an SME in Montreal specializing in web software development for the retail sector. This company designs a personalized e-commerce platform for a client (for example, a chain of stores seeking to sell online). The project requires a team of developers, UX designers, and analysts working full time for several months to write code, integrate the payment system, set up cloud infrastructure, etc. Thanks to the CDAE program, the SME obtains a 30 % reimbursement on the salaries paid to its developers assigned to this project. This allows it to offer a competitive price to its client while maintaining its margins, and possibly hire an additional developer to accelerate delivery. The client benefits from a high-performance e-commerce solution developed locally. This type of customer-focused electronic business development project perfectly aligns with the CDAE objectives.
- Integration of an enterprise information system (ERP/CRM): An IT services company based in Quebec City with about ten employees undertakes system integration mandates for other businesses. One project involves deploying a new ERP system coupled with a CRM for a manufacturing company. The team (IT consultants, programmers, and data specialists) spends many months configuring the software, developing custom modules, migrating data, and training the client’s staff—an activity intensive in IT services. This services firm is eligible for the CDAE: over 75 % of its activities are IT systems design services for independent clients, it maintains at least six full-time employees, and all its technical staff work essentially on these integrations. By claiming the electronic business tax credit, the company recovers part of the salary cost of the team assigned to the client’s deployment. The result: it can offer more affordable rates or execute more projects simultaneously, increasing its competitiveness. For the end client (the manufacturer), this translates into a successful digital transformation at lower cost, carried out by a local, experienced firm.
- Development of an innovative SaaS application: Consider a young tech startup in Laval developing a SaaS application for online human resources management. Its business model is to market this application across Canada and abroad. The startup has a team of eight eligible employees (backend and frontend developers, AI specialist, etc.) who dedicate their full time to developing and improving the digital product. Although not yet profitable, the company invests heavily in software R&D. The CDAE program provides critical support: each year, the company can recover up to $25,000 per eligible employee. With these tens of thousands of dollars received in tax credits, the startup finances part of its payroll and extends its runway without diluting equity (otherwise, it would have had to raise more capital or cut expenses). This boost lets it reach the go-to-market phase more smoothly and begin generating revenue, thus contributing to the vitality of Quebec’s electronic business sector.
- Strengthening cybersecurity of an online platform: A well-established Quebec company offers online commerce services for SMEs (for example, a shared online sales platform). To stay at the forefront and protect client data, it launches a project to develop advanced cybersecurity systems (intrusion detection integration, strengthened transaction encryption, etc.). It assigns an internal team of cybersecurity and cloud infrastructure specialists to this project for much of the year. These activities fall within the CDAE scope (development of cybersecurity systems is explicitly eligible). The company, which meets all other eligibility criteria, files a CDAE tax credit application for these employees. The partial reimbursement obtained allows it to absorb part of this crucial project cost without significantly cutting other budgets. In the end, the online platform’s reliability and security are enhanced, benefiting its entire clientele and improving trust in electronic business.
Each of these examples shows how the CDAE tax credit can apply to varied situations, whether software development, system integration, e-commerce, or cybersecurity. Eligible Quebec companies have every interest in leveraging this financial lever.
Conclusion
The CDAE tax credit has established itself as a valuable tool for Quebec companies engaged in digital projects. By providing a reimbursement of part of IT employees’ salaries, this program reduces the costs of developing electronic business and encourages innovation, creation of specialized jobs, and competitiveness on the global market. The program’s objectives—to stimulate Quebec’s digital economy and support companies in their technological transformation—translate into concrete financial and strategic benefits for participating corporations. However, to fully capitalize on this measure, companies must navigate strict eligibility criteria and a rigorous application process. It is essential to verify compliance with conditions (sector of activity, IT revenue proportion, number of qualified employees, etc.), obtain the necessary certificates from Investissement Québec, then submit the application to Revenu Québec within prescribed deadlines, correctly completing the CDAE form and providing all required supporting documents. The joint roles of Investissement Québec and Revenu Québec in program administration ensure that assistance is allocated to the right companies for the right projects. Ultimately, the Tax Credit for the Development of Electronic Business is a genuine growth lever for Quebec’s technology sector. Whether it is a traditional SME digitizing its operations or a pure-play tech firm exporting its solutions internationally, the CDAE provides concrete support that can make the difference in a project’s success. In a world where digital transformation is imperative, programs like the CDAE help position Quebec as a dynamic player in the digital economy. Quebec companies have every advantage in learning about this tax credit and integrating it into their development strategy when undertaking ambitious electronic business projects.
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