From Tax Credits to Capital: How Québec’s New Budget and the CRIC Open the Door for Non-Dilutive Growth

Finance Minister Éric Girard presented the Québec government's 2025-2026 budget on March 25, introducing significant initiatives to fuel innovation and support businesses within the province. Some important initiatives include the new Credit for Research, Innovation, and Commercialization (CRIC) and the introduction of a $200 million investment fund to replace the Impulsion PME program. These developments present significant opportunities for Panna's current and prospective seeking non-dilutive funding in Québec.

Introducing the Credit for Research, Innovation, and Commercialization (CRIC)

Previously, Québec's innovation landscape saw support from multiple refundable tax credits relating to research and development (R&D). While beneficial, navigating these credits was complex and often led to business challenges. To streamline and enhance accessibility, the government has consolidated these into the Credit for Research, Innovation, and Commercialization (CRIC). This new refundable tax credit offers a 30% rate on the first $1 million of eligible R&D expenditures exceeding an exclusion threshold and a 20% rate for expenditures beyond this limit. Some eligible expenses include salaries, subcontractor fees, payments to specific research organizations, and capital expenditures for property primarily used in R&D or pre-commercialization activities within Québec.

This consolidation simplifies the process of claiming R&D tax incentives for Panna clients, reducing bureaucratic hurdles. With the eligibility opening to cover capital expenditures and pre-commercialization activities, more companies see alignment with their diverse needs, facilitating a smoother path from research to market.

Establishing a New $200 Million Investment Fund

To address the need for early-stage investment in the province's diverse startup landscape, the government has allocated $200 million for a new investment fund, replacing the previous Impulsion PME program. This initiative will support startups and young companies' growth and commercialization efforts, providing working capital during critical development phases.

The new investment fund comes as positive news for Panna clients, opening fresh avenues for securing early-stage, non-dilutive funding. The fund's focus on investment matching can amplify financial resources available to startups, enabling them to scale operations without giving up equity.

Panna's Comprehensive Support Model

At Panna, we understand that navigating the landscape of non-dilutive funding can be complex. Our end-to-end, comprehensive support model guides businesses through every stage of the funding process:

1. Roadmap Building: We work closely with clients to develop strategic funding roadmaps, matching clients with non-dilutive funding opportunities that closely align with theit business goals and R&D activities.

2. Eligibility Analysis: Our team carefully assesses our client's needs and goals, identifying the right funding programs, ensuring clients meet the specific criteria to maximize their chances of success

3. Writing Assistance: Crafting compelling grant applications is crucial. Our experienced grant writers collaborate with clients to articulate their projects effectively, highlighting innovation and potential impact to resonate with funding agencies.

This end-to-end approach has enabled our clients to secure significant funding, giving them a return on investment in a short period and fueling their growth and innovation initiatives.

Québec: A Strategic Hub for Innovation

Québec has established itself as a strategic hub for innovation, with thriving sectors in life sciences, cleantech, and artificial intelligence (AI):

• Life Sciences: The province boasts a robust life sciences ecosystem, encompassing businesses that develop and market products, platforms, processes, and specialized services related to human and animal health. Nearly 30,000 students are enrolled in life sciences programs in colleges and universities, producing 7,600 graduates per year and contributing to a dynamic and skilled workforce.

• Cleantech: Montréal's cleantech industry is rapidly growing, home to over 400 companies tackling environmental challenges through innovations in green chemistry, renewable energy, and sustainable transportation. This sector benefits from Québec's commitment to carbon neutrality by 2050 and proactive environmental policies.

• Artificial Intelligence: Montréal is recognized as a global AI hub, hosting the world's largest concentration of academic researchers in deep learning at Mila, the Québec AI Institute. This vibrant ecosystem attracts major tech companies and fosters collaborations between academia and industry, driving advancements across various sectors.

By supporting competitive business costs with compelling government incentives, these thriving industries make Québec an attractive destination for innovative enterprises.

Alignment with Federal Initiatives

The new provincial funding initiatives complement existing federal programs, including the Scientific Research and Experimental Development (SR&ED) tax incentive and Sustainable Development Technology Canada (SDTC) funding:

• SR&ED: This federal program offers tax incentives for businesses conducting R&D in Canada, reducing the after-tax cost of eligible expenditures. The introduction of CRIC at the provincial level enhances the overall support for R&D activities, providing a more substantial combined benefit.

• SDTC: SDTC funds Canadian companies developing and demonstrating developing environmental technologies that address climate change, improving air quality, water, and soil. Québec's new investment fund aligns with SDTC's objectives, offering additional resources for cleantech organizations within the province.

By leveraging both provincial and federal programs, businesses can optimize their funding strategies, accessing a broader spectrum of financial support for their projects.

Final Thoughts

The 2025-2026 Québec budget introduces groundbreaking changes that promise to revive and strengthen the province's innovation landscape. The government is laying a solid foundation for sustained economic growth driven by innovation by streamlining tax credits and establishing substantial funding mechanisms for early-stage companies.

For current and prospective clients of Panna, these developments present timely opportunities to secure non-dilutive funding, advance R&D initiatives, and achieve commercialization objectives.

As these programs roll out, Panna continues to commit to guiding businesses through the evolving funding landscape, ensuring they are well-equipped to capitalize on any and all applicable resources and support now available in Québec.

Learn how your company can leverage Québec's Innovation Incentives. Book a free discovery call with Panna today.

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