What the Development of E‑Business Tax Credit (CDAE) Can Fund in Quebec
Last updated: 2025-12-02
The Development of E‑Business Tax Credit (CDAE) is a Québec provincial corporate tax credit designed to support specialized IT and e‑business activities. In practical terms, the CDAE primarily funds a portion of salaries for eligible employees who perform qualifying e‑business functions. Organizations need an eligibility certificate from Investissement Québec and then claim the credit with Revenu Québec as part of their corporate tax return.
This guide explains exactly what the CDAE can fund: eligible expenses, ineligible costs, how much support is available, documentation requirements, and how the refundable and non‑refundable components work. It also highlights the planned modernization to “CDAE integrating AI (CDAEIA)” for corporate taxation years beginning after December 31, 2025.
Program Funding Overview
The CDAE is a wage‑based corporate tax credit. It typically supports:
Salaries of eligible employees devoted to specialized IT/e‑business activities
A mix of refundable and non‑refundable credit components
Per‑employee caps and salary thresholds set by program rules
Key features to keep in mind:
Québec‑only: The CDAE is a Québec provincial incentive and must be claimed through Revenu Québec.
Two authorities: Investissement Québec issues eligibility certificates (organization and employees). Revenu Québec administers the tax credit claim through the corporate tax return.
Annual cycle: The claim is made for each taxation year, using the prescribed form (CO‑1029.8.36.DA) and code 86 in the corporate return.
Transition coming: For tax years starting in 2026, the program is expected to operate under “CDAE integrating AI (CDAEIA).” Until then, current CDAE mechanics apply, subject to annual budget updates.
Funding Amounts & Rates
The CDAE uses rate‑and‑cap mechanics applied to eligible salaries. Historically, organizations have relied on the following structure:
Refundable portion: a percentage of eligible salaries, up to a maximum refundable amount per employee
Non‑refundable portion: an additional percentage that reduces Québec corporate income tax payable
Salary cap: a maximum base salary per eligible employee on which the rates apply
Common reference points seen in practice include:
A legacy structure often described as 30% refundable (capped at $25,000 per employee) plus 7.5% non‑refundable (up to $6,250), applied to eligible salaries up to approximately $83,333 per employee
Program budgets and updates may adjust rates, caps, or salary thresholds over time
What this means in practice:
If an eligible employee earns an annual salary within the program’s cap, the employer may claim the refundable portion up to the refundable cap and, where applicable, the non‑refundable portion to reduce tax payable.
If an employee’s salary exceeds the cap, the credit is limited to the maximum salary base allowed.
If the corporation has no tax payable, the refundable portion can still be received as a refund; the non‑refundable share can reduce tax but cannot exceed tax payable.
Important caution:
As of the March 2025 Québec budget, the government announced that CDAE would be modernized and renamed (CDAEIA) for taxation years beginning after December 31, 2025. Stakeholders should verify the applicable rates, caps, and thresholds for their specific fiscal year. When planning multi‑year budgets, model scenarios for both the current CDAE and the upcoming CDAEIA.
Eligible Expenses
The CDAE focuses on salaries. To be eligible, a cost must meet all of the following high‑level conditions:
It is salary remuneration paid to an eligible employee, employed by the applicant corporation with an establishment in Québec.
The employee holds an eligibility certificate (or is covered under the employer’s certification) from Investissement Québec for the period claimed.
The employee performs qualifying e‑business activities as defined by program rules.
The salary is incurred and paid within the corporation’s taxation year being claimed.
Typical categories of eligible expenses include:
Base salaries of eligible employees working full‑time or as defined by the program for the claim period
Overtime and variable pay attributable to eligible work, when aligned with program definitions
Vacation pay and statutory holiday pay included in the employee’s remuneration
Employer payroll costs that are considered part of “salary” under Revenu Québec rules for the CDAE context
Salaries during eligible training directly tied to the employee’s qualifying e‑business functions (when permitted by program guidance)
Salaries of employees who split time between eligible and ineligible tasks, pro‑rated to reflect time spent on eligible activities, supported by time‑tracking or allocation records
Examples of employee roles commonly aligned with eligible activities:
Software developers and engineers (backend, frontend, full‑stack)
Data engineers, data scientists, machine learning engineers (including AI/ML for e‑business solutions)
Cloud architects, DevOps engineers, site reliability engineers
Cybersecurity specialists assigned to the e‑business platform
Product and systems architects designing information systems and e‑business infrastructure
Quality assurance engineers and test automation specialists
UX/UI designers when directly involved in the e‑business application or platform layer
Technical analysts, business analysts, and solution integrators focused on core e‑business processes
Activity examples typically associated with eligibility:
Design, development, integration, and maintenance of e‑business platforms, transactional systems, and middleware
Data pipelines, APIs, and microservices supporting an e‑commerce or e‑business stack
Cloud migration and infrastructure‑as‑code supporting the e‑business environment
Security hardening and monitoring tied to the e‑business platform
Continuous integration/continuous delivery pipelines enabling the e‑business solution
Performance optimization, load testing, and reliability engineering of the e‑business system
Notes on partial eligibility:
When a role spans eligible and ineligible tasks (for example, a developer supporting an internal ERP plus a public e‑commerce platform), only the proportion of salary tied to eligible e‑business work can be claimed. Maintain clear time allocation evidence.
Ineligible Expenses
The CDAE does not fund every cost associated with technology or digital transformation. Common ineligible items include:
Non‑salary expenses such as hardware, software licences, hosting, and cloud fees
Payments to contractors, consultants, or staffing agencies (non‑employees)
Sales, marketing, customer success, and general administration salaries not performing qualifying e‑business activities
Executive compensation and management salaries unless demonstrably performing eligible technical work (rare and scrutinized)
Professional fees (legal, accounting, advisory) and general overhead
Recruitment costs, travel, meals, entertainment
Training unrelated to the employee’s eligible e‑business duties
Severance, bonuses unrelated to performance of eligible activities, or amounts not considered salary under program rules
Salaries that have been fully covered by other government assistance where stacking would result in double funding of the same cost
Program administrators may request detailed justification where eligibility is unclear. When in doubt, document duties, outputs, and time allocation to support the claim.
Expense Documentation Requirements
To claim the CDAE, maintain a defensible audit trail:
Investissement Québec certificates
Employer/organization eligibility certificate for the taxation year
Employee eligibility certificates covering the claimed periods
Payroll records
Detailed payroll registers showing gross salary, pay periods, and amounts paid
Proof of payment (e.g., payroll journal entries consistent with bank disbursements)
Time allocation evidence
Timesheets or allocation summaries for employees with mixed duties
Project descriptions mapping tasks to eligible e‑business activities
Organizational evidence
Job descriptions, org charts, and contracts or offer letters confirming employment status
Proof of establishment in Québec
Claim forms and schedules
Completed CO‑1029.8.36.DA for the taxation year
Corporate income tax return entries (code 86 references) consistent with the claim
Retention
Keep all supporting documents for the prescribed retention period in case of review or audit
Common documentation pitfalls:
Missing or expired employee eligibility certificates for the months claimed
Insufficient time‑tracking to support pro‑rated salaries
Claiming contractor invoices as salaries
Inconsistent amounts between payroll records and CO‑1029.8.36.DA
Lack of evidence for actual payment of salaries within the fiscal period
Examples of Funded Projects
These examples illustrate how the CDAE can support real‑world e‑business initiatives. They are illustrative; actual outcomes depend on rates, caps, and eligibility.
Example 1: SaaS platform modernization
Team: 5 eligible employees (2 developers, 1 data engineer, 1 DevOps, 1 QA)
Average eligible salary: $80,000 each
Legacy reference mechanics
Refundable portion: up to 30% on eligible salary, capped at $25,000 per employee
Non‑refundable portion: up to 7.5% on eligible salary, capped at $6,250 per employee
Indicative outcome per employee
Refundable: $24,000 (30% of $80,000)
Non‑refundable: $6,000 (7.5% of $80,000)
Project‑year aggregate (5 employees): ~$150,000 in combined refundable and non‑refundable credits
Example 2: E‑commerce re‑platform + data pipeline
Team: 3 eligible employees (1 architect, 1 backend developer, 1 security specialist)
Salaries: $120,000, $90,000, $85,000
Salary cap applies: For any salary above the cap, credit is limited to the maximum base (historically around $83,333)
Indicative outcome
Architect: credit calculated on capped base
Others: credit calculated on actual eligible salaries (subject to cap)
Aggregate recovery aligned with cap and rate rules
Example 3: AI‑enabled personalization for an online retailer
Team: 4 eligible employees (2 ML engineers, 1 data engineer, 1 SRE)
Salaries within cap
Indicative outcome per employee similar to Example 1, assuming rates and caps for the year
Note: For taxation years starting after Dec 31, 2025, the CDAEIA is expected to apply. Confirm updated rules for AI‑related work.
Funding Disbursement & Claiming Process
The CDAE is claimed through your Québec corporate tax return:
Obtain eligibility certificates
Organization and employee certificates issued by Investissement Québec
Complete the CDAE form
CO‑1029.8.36.DA, prepared for the taxation year, with all required schedules and annexes
File with Revenu Québec
Include the completed form and enter the amounts in the corporate return (watch the code 86 references and relevant lines in the CO‑17)
Refundable vs non‑refundable
Refundable portion: paid even if the corporation has no tax payable
Non‑refundable portion: reduces Québec tax payable and cannot exceed it
Timing
Claims align with corporate filing deadlines. Late claims risk denial. Some changes or amendments may be possible within statutory limits.
Keep a complete dossier:
Certificates, payroll, time allocations, and calculations must reconcile
Align your claim year with certificate coverage periods
Ensure the return, annexes, and CO‑1029.8.36.DA figures match
Stacking Rules
The CDAE can interact with other incentives. Core principles:
No double counting: The same dollar of salary cannot be fully funded by multiple programs. Government assistance must be netted out when required.
SR&ED interaction: If you also claim SR&ED on eligible salaries, reduce the SR&ED qualified expenditures or the CDAE base as required. Track assistance carefully to avoid overclaims.
Wage subsidies: Deduct any wage subsidy amounts from the salary base before calculating the CDAE where stacking rules require.
Caps still apply: Even with other programs, the CDAE per‑employee caps and salary thresholds remain in force.
When planning, create a stacking matrix identifying each program’s treatment of “government assistance” and required adjustments.
Real‑World Budgeting Tips
Start with roles and time allocation
Map each employee’s duties to eligible e‑business activities. Use timesheets for mixed roles.
Model with conservative rates
Use historical CDAE rates and caps as a baseline and add sensitivity scenarios for budget changes or CDAEIA updates for 2026 starts.
Watch the cap
For high earners, the salary cap often becomes the binding constraint. Budget at the cap for planning purposes.
Separate employees from contractors
If you rely on contractors, consider whether converting key roles to employees would improve CDAE eligibility (balanced with HR/operational needs).
Align HR artifacts
Job descriptions and performance objectives should reflect eligible technical duties where accurate. This helps at audit time.
Coordinate with tax and finance
Synchronize CDAE computations with SR&ED, innovation credits, and any wage subsidies to manage stacking and maximize net benefit.
File on time
Maintain a claim calendar with certificate renewals, CO‑1029.8.36.DA preparation, and return filing milestones.
Conclusion
The Québec Development of E‑Business Tax Credit (CDAE) funds a portion of eligible employees’ salaries engaged in specialized e‑business and IT activities. It combines refundable and non‑refundable components, is subject to per‑employee caps, and requires robust documentation—most notably Investissement Québec eligibility certificates and a complete CO‑1029.8.36.DA claim with Revenu Québec. As the program evolves toward CDAEIA for taxation years starting in 2026, plan with both current and future rules in mind. By focusing claims on eligible roles, sound time allocation, and proper stacking with other incentives, organizations can budget accurately and capture the full value of the Quebec e‑business tax credit.
