Provincial Budget 2025: Major Changes to the Tax Credit for the Development of E-Business (TCEB)

June 9, 2025

In this bulletin, we will be discussing the TCEB as part of our series on the 2025 Quebec budget and corporate taxation. This particular tax credit aims to boost innovation and competitiveness in the digital marketplace by providing strategic tax assistance to businesses specializing in information and communication technologies. It was introduced to spur the growth of Quebec’s technology sectors through tax incentives granted to companies developing or integrating e-business solutions.

Before the 2025 Quebec budget reform, the TCEB comprised a 24% refundable tax credit, coupled with a 6% non-refundable tax credit. In 2024, the government began adjusting TCEB rates as part of the updated economic priorities, gradually reducing the refundable credit to 20% by 2028 and increasing the non-refundable credit to 10%.

New adjustments were announced in the 2025 provincial budget to ensure that the incentives align more closely with the changing technological landscape, in particular by shifting the focus to the integration of recent emerging technologies, such as artificial intelligence (AI) and data processing and hosting.

The new rules provide that only activities that incorporate artificial intelligence functionalities in a significant way will be eligible for the TCEB going forward. In addition, data processing and hosting services (NAICS 51821) have been added to the list of eligible activities, which shows the increasingly important role they play in today’s technological landscape. However, activities aimed at maintaining or upgrading information systems and technological infrastructure have been removed from the list, refocusing the program on cutting-edge technologies.

Businesses engaged in inter-company outsourcing, mainly with subsidiaries of foreign companies, are particularly affected by the changes, in that credit rates will be reduced by half if the proportion of such outsourcing reaches 50% or more. The idea is to encourage those businesses to contribute more directly to the local economy and technological innovation in Quebec.

The changes will apply to tax years beginning after December 31, 2025, but companies have the option of electing to apply them to tax years beginning after the budget presentation, provided the election is made before the end of the ninth month following the deadline by which they are required to file their tax returns.

Read our first bulletin on the 2025 provincial budget titled “Provincial Budget 2025: New Refundable Tax Credit for Research, Innovation and Commercialization (CRIC)”

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Written by

Luc Pariseau
Partner, Lawyer
François Rizcallah
Lawyer

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April 4, 2025

Airudi: Rapid, people-centric growth powered by AI

Growth is nothing new at Airudi. This rising AI star has consistently doubled or even tripled its sales every year since its launch in 2019. “We’re HR specialists. Growth is in our DNA,” says Amanda Arciero, Co-founder and VP Operations at Airudi. Airudi’s algorithm automates HR decision-making processes, helping companies make strategic decisions faster. Its AI-powered solution is designed by and for people and is rapidly gaining in popularity. “It’s like a virtual HR manager,” says Pape Wade, CEO and Co-founder of Airudi. Pape was once HR director of a large company with 3,000 employees, and Amanda was his senior advisor when they made the same observation: “HR was essentially a support function. Most professionals were consumed by repetitive tasks and time-consuming processes,” says Amanda. “Plus, we were seeing tons of data accumulate in filing cabinets and spreadsheets that we weren’t using at all.” Amanda and Pape decide to leave their respective jobs to pursue an ambitious goal: to use the data accumulated by HR departments to automate administrative workflows and put people back at the heart of organizations. Thus Airudi was born. The two entrepreneurs landed their first major contract worth $3 million in 2020. Year after year, they continued to gain new customers in Canada, Europe and, more recently, Africa. Their growth has been organic but skyrocketing. In five years, Airudi has become a leader in the AI community and the HR sector. Thanks to strategic partnerships, over 5,000 companies worldwide now use their products. From left to right: Amanda Arciero and Pape Wade. Airudi’s added value With some 50 employees in Quebec, Ontario and Senegal, Airudi currently offers three AI-powered solutions: workforce prediction and allocation, occupational health and safety, and enhanced recruitment. “Our goal is to reach around $100 million in profit by 2028,” says Amanda. The company’s name, Airudi, is pronounced like the word érudit (“erudite” in French). It’s a nod to Airudi’s multi-disciplinary team of artificial intelligence, data science, human resources and business intelligence experts. The secret to their success? According to the two entrepreneurs, it’s a combination of several factors. 1. Putting people first First of all, Airudi’s algorithm addresses a major concern for the HR sector. We’re using digital intelligence to make HR teams more efficient and productive, allowing them to focus on what matters: creating human connections. Amanda Arciero, Co-founder and VP Operations, Airudi Amanda gives the example of the recruitment platform, which helps customers recruit better, faster and on a larger scale by automatically matching profiles to vacant positions and ensuring fast and efficient follow-up and interview scheduling. “By reducing the time spent on recruitment, our customers can spend more time building relationships with candidates and successfully onboarding them into the company,” says Amanda. Two other strengths of the Airudi solution: quality and granularity. “The CFO of a company with 3,000 employees is not at all the same thing as the CFO of a company with 30 employees. Our algorithm captures this kind of nuance.” 80%: Reduction in recruitment time when using Airudi’s enhanced recruitment solution. A people-centric approach guides the company’s own business strategy, not just its product development. The first team that Airudi hired—even before building a technology team and thinking about fundraising—was an advisory board made up of experienced businesspeople including Robert Dutton, ex-CEO of Rona, Frantz Saintellemy, President and CEO of LeddarTech, and Julie Plouffe, Partner, SVP Finance and Chief Accounting Officer at Sagard. “We learned together and built Airudi together,” says Pape. “Our advisory board continues to give us invaluable insight.” Next, the two entrepreneurs established strategic partnerships with researchers working in Quebec’s top AI network. With highly skilled employees ranging from masters-holders to post-docs, Airudi has developed an SaaS (Software as a Service) business model that guarantees financial stability through recurring revenues. 2. Building strategic partnerships Strategic partnerships were also important to the company’s growth. “We operate mainly through redistribution partnerships or marketing agreements,” says Amanda. “We talk more about partners than customers at Airudi.” One of Airudi’s most promising partnerships is with the Maritime Employers Association (MEA), the organization that manages the workforce at the Port of Montreal. Since ship arrivals and departures don’t follow a regular daily schedule, the MEA had to ask terminal operators to determine their labour requirements for the next day. Port employees’ schedules were generated daily at 6 p.m. Taking into account port traffic, weather conditions, and the quantity and type of cargo, Airudi developed an algorithm that optimizes workforce allocation while respecting collective agreements, the availability of port workers and the skills required. “Our solution accurately predicts ship arrival times up to 21 days in advance, ensuring smooth operations in the port and reducing workforce allocation errors from 30% to 15%, generating significant savings in labour costs,” says Amanda. The partnership with the Port of Montreal has opened doors in Europe. The Quebec-based company subsequently developed a strategic partnership with SOGET, a French company specializing in streamlining logistics flows, covering 40 logistics sites in 8 countries. More recently, Airudi has adapted its predictive solution to provide Urgences-santé with a similar paramedical staff planning tool. 3. You’re never too small to go international International expansion is another successful strategy that has put wind in the company’s sails. “Innovation is experienced differently in North America, Europe and Africa,” says Pape. “We’re an innovative company. It’s important to have these different perspectives.” Many companies say to themselves: We’re going to make our name on the Quebec market, then go international. I think this is a mistake. We had five employees and were already developing the international market.” Pape Wade, CEO and Co-founder of Airudi Airudi has already had customers in Europe for two years and has just opened offices in Pape’s native Senegal. The growth and innovation potential of the African market is still underestimated. “Our Cameroonian-born scientific director, Foutse Khomh, ranks as the world’s fourth most prolific researcher in terms of publications in AI, and he ranks first in Canada. There’s a lot of talent and growth potential on the African continent,” says Amanda. Currently, 80% of Airudi’s sales are generated in Canada, 12% in Europe and 8% in Africa. As it expands its international footprint, the SME remains firmly rooted in the Quebec technology community. “When it comes to innovation, we’re very strong in Quebec, with access to the best talent and researchers,” says Pape, who also sits on the board of Mila – Quebec AI Institut. Growth, but not at any price AI is a powerful tool, but one that raises a number of ethical issues. “We’re making the same mistake we made with the environment. If we don’t put the responsible side of AI first, we’ll soon hit a wall.” Pape Wade, CEO and Co-founder, Airudi Each year, Pape and Amanda participate in a strategic planning exercise to ensure that Airudi’s business objectives and technological advancement are aligned with its values. Are we creating a positive impact for the benefit of society, employees and customers? Do we create people-centric products? Are we making good use of technology? “We put a lot of thought into all our decisions. If there’s growth potential, but it’s not aligned with our values, we won’t consider it.” Amanda Arciero, Co-founder and VP Operations, Airudi Pape likes to use the analogy of agriculture when talking about Airudi’s growth strategy: “Seeds are carefully sown and tended until they flower successfully. You have to be patient.” For example, the strategic partnership with SOGET came about after a year and a half of work and meetings. “A partnership that opens the door to 40 ports around the world certainly takes time,” says Pape. Conclusion Putting people back at the centre of organizations. Customers who become partners. Learning from other perspectives and approaches. Growth, but not at any price. In five years, Pape and Amanda have built a winning strategy. Today, Airudi is a solid company rooted in sustainable values. What’s next? According to Amanda, the more we look to the future, the more technology will be part of our lives. It’s essential to shore up companies against current challenges, including labour shortages, the arrival of new generations on the job market and inflation. Airudi is currently looking for ways to further democratize access to its solutions, so that all organizations can benefit from them—while still centring people, being responsible, and creating value for companies and workers. “Our philosophy is not to make money. Our philosophy is to create innovative, caring, people-centred technology that creates a positive impact. Usually, when you focus on good business, success and growth naturally follow,” says Amanda.

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Provincial Budget 2025: Significant Increase in Public Utility Tax (PUT) Rates

The PUT is a crucial component of provincial finances and has a significant impact on the operating costs of the many companies providing essential services. The PUT was introduced in Quebec in fiscal 2004–2005 to replace the municipal property tax on specific infrastructure used by companies in certain key sectors. Such infrastructure includes telecommunications network facilities, gas distribution systems, and energy production, transmission and distribution systems. The latest Quebec budget provides for gradual changes, including an increase in applicable rates over the next decade. The rate applicable to electricity production, for example, will rise from 0.7% in 2027 to 1.5% by 2035. However, this increase does not apply to transmission and distribution operations. The rate applicable to telecommunications will also rise from 0.7% to 1.5%. Lastly, the rate that applies to gas distribution will rise from 0.75% to 1.5% by 2035 on the first 750 million dollars in revenue. The portion of revenue exceeding that amount will be subject to a 1.5% rate as of 2027. As part of the changes introduced in the latest budget, the PUT exemption has been expanded to include certain municipal or public bodies performing government functions in Canada, as well as the corporations owned by such entities. A PUT exemption will also be granted on a pro rata basis to entities operating jointly with other non-eligible entities, based on the distribution of voting rights or income and loss shares. An anti-avoidance rule has been established to ensure that such distribution remains reasonable and in keeping with the spirit of the law. These adjustments apply as of calendar year 2025, with declaratory provisions covering the aforementioned exemptions. Through such provisions, companies having met the criteria set out for previous years should be able to claim back the PUT. To do so, they will have to submit their application by June 30, 2026, or the deadline by which they are required to file their tax returns. While it is true that this measure aims to ensure that the PUT reflects the changing infrastructure needs of public utility companies and to optimize their tax contribution, the impact it will have on stakeholders in the targeted sectors will be considerable, and they will have to adjust operations to cope with future increases. Read our first bulletin on the 2025 provincial budget titled “Provincial Budget 2025: New Refundable Tax Credit for Research, Innovation and Commercialization (CRIC)” Read our second bulletin on the 2025 provincial budget titled “Provincial Budget 2025: Major Changes to the Tax Credit for the Development of E-Business (TCEB)”

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AI: Where Do We Go From Here?

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In other words, are we successfully transitioning from R&D in the field of AI to the production, commercialization, and industrialization of products and services in Canada that are highly distinctive, innovative, or competitive on the international scene? Does the legislative framework in Quebec and Canada sufficiently support technological advancements resulting from our AI investments, while also showcasing and maximizing the outcomes derived from the exceptional human talent present in our universities, research groups, institutions, and companies? As important as it is to protect privacy, personal information, data, and the public in general in the context of AI use, it is equally important to enable our entrepreneurs, start-ups, businesses, and institutions to strategically position themselves advantageously in this field – potentially the deciding factor between a prosperous society and one lagging behind others. 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Amidst the swift evolution of international commercial relations, what pivotal role will Canada, and notably its innovative entrepreneurs, businesses, institutions, cutting-edge universities, and renowned groups, play in shaping our future? Can they seize their rightful place and lead the charge in the relentless march of future developments? In this context, is regulating AI from a national perspective the strategic and logical road to follow, or could an excess of regulations stifle Canadian businesses and entrepreneurs, hindering our chances in the high-stakes AI race? The head of Google’s Deepmind, Demis Hassabis, recently stated that greater international cooperation around AI regulation was needed, although this would be difficult to achieve given today’s geopolitical context[2]. 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Bill C-27, known as the Digital Charter Implementation Act, 2022, was a legislative proposal in Canada aiming to overhaul federal privacy laws and introduce regulations for artificial intelligence (AI). It encompassed three primary components, including the Artificial Intelligence and Data Act (AIDA), intended to regulate the development and deployment of high-impact AI systems. This Act[5] would have required organizations to implement measures to identify, assess, and mitigate risks associated with AI, including potential harms and biases. It also proposed the establishment of an AI and Data Commissioner to support enforcement and outlined criminal penalties for the misuse of AI technologies. 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May 23, 2025

Provincial Budget 2025: New Refundable Tax Credit for Research, Innovation and Commercialization (CRIC)

As part of the Quebec budget for 2025, the provincial government has announced a host of new tax measures and changes to existing tax measures. This series of bulletins will provide an overview of three of these measures which introduce significant tax changes and will have a considerable impact on many Quebec businesses: the introduction of the CRIC, changes to the tax credit for the development of e-business (TCEB) and changes to the public utility tax (PUT). Research and development tax credits, such as the R&D tax credit for salaries and wages, the university research tax credit and the pre-competitive research tax credit, all have a very important place in Quebec’s tax and economic systems. They were designed to provide substantial tax support for businesses investing in research and development (R&D), while reducing the financial risks inherent to such activities. The new CRIC simplifies and centralizes these tax measures by grouping them under a single tax credit, making application for Quebec businesses more consistent and efficient. This new credit’s basic rate will be 20%, with an increased rate of 30% applicable to the first million dollars of eligible expenses. This structure is designed to be internationally competitive and help Quebec businesses maintain a significant tax advantage over their counterparts in other jurisdictions. To benefit from the credit, a business must carry out R&D or commercialization activities in Quebec and incur eligible expenses in the course of these activities. Eligible expenses include salaries directly linked to research, payments to subcontractors and research organizations and certain capital expenditures, save for those made to acquire real estate property such as land, buildings and rights of use over buildings. The real estate exclusion is intended to ensure that tax support is spent on technological innovation rather than real estate investments. The credit takes effect for all tax years ending after March 25, 2025. The tax credits for scientific research and experimental development, university research or public research centres, private partnership pre-competitive research, fees and dues paid to a research consortium, technological adaptation services and industrial design are all abolished, as they are now included in the new CRIC.

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May 5, 2025

Reminder: Canada’s Modern Slavery Act Report Due by May 31, 2025

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