Tax Insights: Update on Québec’s Economic and Financial Situation

Issue 2025-42

In brief

On November 25, 2025, the Minister of Finance, Eric Girard, presented the Update on Québec’s Economic and Financial Situation (economic statement). The economic statement does not change corporate or personal tax rates, but does:

• reduce the 2026 base contribution rate for the Québec Pension Plan (QPP)
• decrease 2026 premium rates for the Québec Parental Insurance Plan (QPIP)
• introduce a temporary Health Services Fund (HSF) contribution holiday to support the agriculture, forestry and fishing sectors
• harmonize with various tax measures announced in the federal government’s November 4, 2025 budget
• revise and extend the refundable tax credit for Gaspésie and certain maritime regions of Québec
• extend the income-averaging mechanism for certified forest producers
• adjust the refundable tax credit relating to mining or other resources
• revise the exemptions allowed for the purpose of calculating the premium payable under the Public Prescription Drug Insurance Plan (PPDIP)

This Tax Insights presents these tax initiatives as set out in the economic statement.

In detail

Reduction in the 2026 base contribution rate to the QPP

Given the sound financial health of the QPP, the base contribution rate that applies for 2026 will be reduced from 10.8% to 10.6%. This reduction is shared equally between employees and their employers, such that the contribution rate for each will be set at 5.3%.

Decrease in 2026 QPIP premium rates

To give more money back to workers and employers, QPIP premium rates will decrease by a total of 13% as of January 1, 2026. As a result, QPIP premium rates will be:

• 0.430% for employees
• 0.602% for employers
• 0.764% for self-employed workers, intermediate resources and family-type resources

Temporary HSF contribution holiday to support the agriculture, forestry and fishing sectors

To provide rapid financial assistance to employers in the agriculture, forestry and fishing sectors, thereby reducing their tax burden and supporting jobs in these sectors, a temporary HSF contribution holiday will be introduced for two years. This will fully exempt certain employers from paying the HSF contribution for 2026 and 2027.

For 2026 and 2027, an “exempt specified employer” will be any specified employer whose total payroll for these years will be attributable, in a proportion of more than 50%, to activities represented by one of the following North American Industry Classification System (NAICS) codes:

• crop production
• animal production and aquaculture
• forestry and logging
• fishing
• sawmills (except shingle and shake mills)
• pulp mills

In addition, the Act respecting the Régie de l'assurance maladie du Québec (RAMQ) provides that any individual resident in Québec at the end of a given year shall pay an HSF contribution on their total income for the year if it exceeds a certain threshold, up to a maximum of $1,000.

To take into account the fact that many individuals have income from the agriculture, forestry or fishing sectors, the RAMQ Act will be amended to provide that an individual with income from these sectors will be able to deduct, in calculating their total income for a given year, either 2026 or 2027, for the purpose of their HSF contribution, an amount equal to their net business income from these sectors.

Harmonization with measures announced in the federal government’s November 4, 2025 budget

The Ministère des Finances du Québec intends to harmonize Québec’s tax legislation and regulations by cancelling the increase in the capital gains inclusion rate and the Canadian Entrepreneurs’ Incentive, and maintaining the increase in the lifetime capital gains exemption.

In addition, Québec’s tax legislation and regulations will be amended to incorporate, with adaptations based on their general principles, measures relating to:

• qualified investments for registered plans
• immediate expensing for manufacturing and processing buildings
• patronage dividends paid in shares by agricultural cooperatives
• eligible activities under Canadian Exploration Expense
• transfer pricing, with respect to transfer pricing application standards
• investment income derived from assets supporting Canadian insurance risks

Extension and adjustment of the refundable tax credit for Gaspésie and certain maritime regions of Québec

The refundable tax credit for Gaspésie and certain maritime regions of Québec was introduced on November 17, 2000. The eligibility period for this tax credit is currently expected to end on December 31, 2025. To maintain support for economic development in the Gaspésie–Îles-de-la-Madeleine region and certain maritime regions of Québec, the eligibility period for the refundable tax credit for Gaspésie and certain maritime regions of Québec will be extended by five years. The tax legislation and the sectoral act will thus be amended to extend until December 31, 2030, the eligibility period for the refundable tax credit for Gaspésie and certain maritime regions of Québec.

Extension of the income-averaging mechanism for certified forest producers

Introduced on a temporary basis in March 2016, the income-averaging mechanism for certified forest producers was implemented to encourage private forest owners to actively manage their forest lands with a view to marketing timber. As part of the March 2020 budget speech, this mechanism was extended by five years and the tax carry-over period was increased from seven to 10 years. The measure thus applies for taxation years ending before January 1, 2026.

The income-averaging mechanism for certified forest producers in respect of a private forest will be extended for a period of two years, for both the application of income tax and the individual contribution to the HSF. Accordingly, income from non-retail timber sales, qualifying as recognized commercial activities, realized by a forest producer in respect of a private forest in a year or fiscal year, as the case may be, ending before January 1, 2028 will continue to be eligible for the averaging mechanism.

Adjustment to the refundable tax credit relating to mining or other resources

The refundable tax credit relating to mining or other resources (tax credit relating to resources) was introduced as part of the March 29, 2001 budget speech.

As part of the March 25, 2025 budget, a number of significant changes were made to the tax credit relating to resources. These changes consisted, in particular, in:

• adding development expenses relating to mining resources incurred in Québec to the expenses eligible for this tax credit
• revising the tax credit rates applicable to the eligible expenses relating to mining resources

As part of the same budget, the new limit on eligible expenses of $100 million per five-year period was also announced.

To acknowledge the reality of corporations operating in Québec’s Far North, while prioritizing the execution of work relating to critical and strategic minerals, the tax legislation will be amended so that the calculation of the balance of the cumulative eligible expense limit is adjusted to take into account only half of the eligible expenses relating to mining resources incurred in Québec’s Far North that consist of expenses mainly attributable to one or more critical or strategic minerals.

This amendment will apply for a taxation year or fiscal year, as the case may be, that begins after March 25, 2025.

Adjustment of the exemptions allowed for the purpose of calculating the premium payable under the PPDIP

Adults who are not covered throughout a year by a group insurance contract, an individual insurance contract concluded on the basis of one or more of the distinctive characteristics of group insurance or by an employee benefit plan applicable to a determined group of persons must generally pay a premium for that year to finance the PPDIP. For the 2025 calendar year, the maximum premium payable is $755 per adult.

Accordingly, to maintain the principles underlying the determination of the amount of the premium payable under the PPDIP, the government will adjust, for 2025, the amount of each of the exemptions currently allowed.