Overview

The federal budget presented on November 4, 2025 (the “Budget”), proposes a significant change to the Critical Mineral Exploration Tax Credit (CMETC). As a reminder, the CMETC is equal to 30% of “specified mineral exploration expenses”1 incurred in Canada that a company has renounced to flow-through share investors. Critical minerals currently eligible for the CMETC The critical minerals currently eligible for the CMETC are nickel, cobalt, graphite, copper, rare earth elements, vanadium, tellurium, gallium, scandium, titanium, magnesium, zinc, platinum group metals, uranium and lithium (including lithium from brine deposits). Critical minerals added to the list The Budget proposes to expand the definition of “critical mineral” to include the following additional critical minerals: bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin and tungsten. Impact of this measure on mining exploration expenses The measure will make the 30% CMETC apply to exploration expenses relating to these new types of critical minerals that a mining exploration company would renounce to flow-through share investors. The measure will cover exploration expenses renounced under flow-through share agreements entered into after Budget Day and on or before March 31, 2027. The Budget also confirms the renewal of the Mineral Exploration Tax Credit until March 31, 2027 (METC). Please feel free to contact our professionals for more information Canadian exploration expenses incurred by a company after April 7, 2022, as part of mineral exploration activities conducted from or above the surface of the earth targeting mainly critical minerals.

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)”

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)”

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.

Lavery represented Quaze Technologies in its sale to Red Cat Holdings, a U.S.-based company specializing in advanced drones and robotics for the defense and national security sectors. About Quaze Technologies Founded in Quebec, Quaze Technologies develops wireless power transmission technology for autonomous systems, such as drones, ground robots, unmanned underwater vehicles and other robotic platforms. Quaze’s technology makes autonomous charging possible, without the need for physical contact, connectors or precise alignment, prolonging the operational autonomy of systems deployed in complex environments. About the transaction This transaction represents a significant step in Quaze’s growth. By joining Red Cat Holdings, Quaze will be able to fast-track the development of its technology and its integration into the international autonomous platform ecosystem, while continuing to advance its open model with third-party manufacturers. The transaction also comes at a time when energy autonomy is becoming a strategic issue for the future of robotic systems. Expertise at the service of growth Lavery acted as legal counsel to Quaze Technologies in this cross-border transaction, drawing on its expertise in mergers and acquisitions and business law, as well as its experience in advising tech companies on growth-oriented transactions. The Lavery team, led by Alexandre Hébert, included Luc Pariseau, Joseph Gualdieri, Jessy Menard and Michael Debay.

Practice Areas

• Estates & Trusts
• Taxation Law

Bar Information

Called to the bar: 1989 (QC)

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