CDAE Evolves into CDAE AI: What Québec Tech Companies Need to Know

The Government of Québec has updated one of its most important incentives for the tech sector. Starting with fiscal years starting after December 31, 2025, the long-standing Tax Credit for the Development of E-Business (CDAE) will transition into the CDAE AI (Tax Credit for the Development of E-Business Integrating Artificial Intelligence). 

This change reflects Québec’s growing focus on artificial intelligence and will have important implications for how companies demonstrate eligibility. Businesses that previously benefited from the CDAE will need to reassess how they classify revenue, document projects, and track employee activities. 

New Focus on AI Integration 

The central shift lies in the requirement that eligible activities must now integrate artificial intelligence in a “significant manner”. To qualify, AI must play a key role in improving automation, data analysis, personalization, or optimization.  

The new framework defines AI broadly but emphasizes advanced technologies such as machine learning and neural networks. Qualifying systems should perform tasks that normally require human intelligence, such as decision-making, problem-solving, natural language understanding, while improving efficiency, automating processes, providing recommendations, and enhancing user experiences. 

"Significant manner” means AI must bring a notable and measurable improvement. Simply adding a small AI feature or tool is not enough. Projects should demonstrate that AI is central to automation, optimization, or personalization efforts. 

Critically, project documentation will drive eligibility. Descriptions in contracts, statements of work, timesheets, and supporting records must clearly explain the scope and impact of AI features. 

Key Structural Changes to the Credit 

Revenue Criteria 

To qualify, companies must still meet both revenue thresholds: 

• 75% of gross revenue from IT sector activities 

• 50% of gross revenue from core development and licensing activities 

A key update is that data processing and hosting (NAICS 51821) now count toward both thresholds (previously only toward the 75% test). This expansion benefits SaaS and infrastructure-heavy firms but underscores the need for accurate revenue mapping. 

Employee Eligibility 

Companies must still employ at least six full-time  employees who each spend at least 75% of their time on eligible activities. However, the list of admissible tasks is more limited. 

Now Excluded 

• Maintenance and routine evolution (bug fixes, patches, system monitoring) 

• Internal IT support and process improvements

Still Admissible 

• Development and integration of IT systems with significant AI features 

• AI-driven automation, optimization, personalization, and data analysis tied to commercialized products or client deliverables 

Precise time tracking and project documentation will be more important than ever to distinguish eligible work from now excluded tasks. 

Funding Adjustments 

The total credit remains 30% of eligible salaries, but the balance between refundable and non-refundable portions will gradually shift: 

The previous $83,333 salary cap has been replaced with a new exclusion threshold: the first $18,571 of each eligible salary (indexed annually) will not qualify for the credit. 

While the overall rate remains unchanged, the shift toward non-refundable credits will reduce immediate cash flow benefits, making tax planning and forecasting increasingly important. 

Preparing for the Transition 

The transition from CDAE to CDAE AI redefines what counts as innovation and raises the standard for proving it. While the total credit remains 30 percent, the combination of new activity definitions, stricter employee eligibility, and shifting refundability means that success will depend on how well a company explains and supports its claim. 

Clear documentation will be essential. Detailed project descriptions, accurate revenue classification, and precise time tracking are no longer optional; they are central to determining eligibility. Incomplete or vague submissions risk delays, reductions, or even rejection. 

For many Québec tech companies, this is an opportunity to align operations with the province’s push toward meaningful AI development while still benefiting from a valuable tax credit. But it also means the margin for error has narrowed. Understanding the new framework and presenting a strong, well-organized file will be key to maintaining access to this support. 

Talk to an Expert 

R&D Partners helps innovative Québec companies interpret and optimize claims under evolving programs such as CDAE AI - from revenue mapping and eligibility reviews to audit-ready documentation and claim preparation. 

Contact us to discuss your situation and ensure your CDAE AI claim is complete, compliant, and optimized.