C3i tax credit for manufacturing investment in Quebec

Modernizing a production line, automating an operation or implementing a management system often requires a substantial investment. Quebec’s tax credit for investment and innovation, commonly known by its French acronym C3i, can reduce the after-tax cost of certain assets acquired and used in Quebec.

For specified expenses incurred after December 31, 2023, the rate is 15%, 20% or 25%, depending on the territory where the property is used primarily. The credit is fully refundable when the expenses relate to a taxation year that begins after that date.

The C3i is not an automatic grant based on the full value of a project. The property’s capital cost allowance class, condition, location and period of use, the acquisition date, excluded expenses and other assistance all affect the final calculation.

What is the C3i tax credit?

The C3i is a Quebec tax measure administered by Revenu Québec. It applies to specified expenses incurred by an eligible corporation, or by a partnership of which it is a member, to acquire specified property.

A corporation must generally have an establishment in Quebec and carry on a business there. Tax-exempt corporations, Crown corporations and their wholly controlled subsidiaries, aluminum-producing corporations and oil-refining corporations are excluded.

Since 2024, full refundability under the new rules is no longer restricted by corporation size. A corporation may therefore receive the credit even if it does not have sufficient Quebec income tax payable, subject to all applicable conditions.

Revenu Québec’s corporation income tax guide provides the detailed definitions, rates, excluded amounts and cumulative limit. Revenu Québec notes that this guide is currently available in French only.

What property qualifies for the C3i in 2026?

Property must have been acquired after March 10, 2020, and before January 1, 2030. In 2026, the main categories of specified property are:

• class 43 manufacturing or processing equipment that would have been included in class 53 had it been acquired before 2026;
• class 50 general-purpose electronic data-processing equipment and related systems software;
• a class 12 eligible management software package;
• certain class 43 property used to process ore extracted from a mineral resource outside Canada;
• certain property used in eligible smelting, refining or hydrometallurgy activities involving Canadian ore.

The transition from class 53 to class 43 matters. Class 53 applied to manufacturing or processing equipment acquired before 2026. For an acquisition after December 31, 2025, the property is generally covered through class 43 if it would otherwise have belonged to class 53.

The property must be new and begin to be used within a reasonable time after acquisition. An eligible management software package must be used primarily in Quebec in the business for at least 730 consecutive days. Other specified property must be used only in Quebec and primarily in the business during that period, subject to the exceptions for certain losses, destruction or major breakdowns.

An enterprise resource planning system may be eligible if it is used primarily to integrate all of a business’s functions and operational processes. Certain customer relationship or supply-chain management packages may also meet the definition. A product label alone is not enough: functionality, tax class and actual use determine eligibility.

C3i rates by investment location

For specified expenses incurred after December 31, 2023, the rate depends on the territory where the property is used primarily.

Economic vitality zone	C3i rate
Low economic vitality territory	25%
Intermediate economic vitality territory	20%
High economic vitality territory	15%

The high economic vitality territory consists of the municipalities in the Montréal and Québec metropolitan communities. The intermediate territory is the rest of Quebec that is neither low nor high vitality. The list of low-vitality regional county municipalities and agglomerations changes over time, and some entries have transitional dates.

The head office address does not necessarily determine the rate. The primary location of each item of property is what matters. A corporation with several plants may claim different rates for different assets.

Before forecasting project returns, verify the list in force for the relevant date in Revenu Québec’s corporation income tax guide instead of assigning a rate based only on the administrative region.

How is the credit calculated?

The applicable rate does not necessarily apply to the total invoiced cost. In simplified terms, specified expenses are the expenses included in the property’s capital cost, less the excluded amount and other required reductions.

The exclusion threshold is generally:

• $5,000 for class 50 property or an eligible management software package;
• $12,500 for other specified property.

For example, assume an eligible machine used in an intermediate zone has $212,500 in specified expenses before the exclusion. The amount used to calculate the credit would generally be $200,000. At a 20% rate, the indicative credit would be $40,000 before other adjustments and subject to all conditions.

Specified expenses are subject to a $100-million cumulative limit. For a taxation year beginning after 2023, the calculation generally takes into account expenses incurred in the 36 months preceding the start of the year concerned—effectively a window covering the current year and the three preceding years. Associated corporations must share the limit under the applicable rules and file the prescribed agreement when required.

Government and non-government assistance, benefits and certain other amounts relating to the same property may reduce the expenses used in the calculation. A financing table that identifies each asset, source of assistance and supplier helps prevent the credit from being overstated.

Expenses and situations requiring closer review

A quote that combines equipment, installation, training, maintenance, subscriptions and support does not automatically make every component eligible. The corporation must identify which amounts form part of the property’s capital cost and which are current expenses.

Expenses incurred with certain non-arm’s-length persons are excluded. Property acquired for certain recognized businesses related to a major investment project, or used in expressly excluded activities, is not specified property.

Cloud-based software also warrants separate analysis. A service subscription does not necessarily create class 12 depreciable property owned by the corporation. The licence, rights acquired, configuration and services must be reviewed using the agreement and their actual tax treatment.

Specified expenses must generally be incurred and paid in the year, or paid within 18 months after the end of the year in which they were incurred. This payment period should not be confused with the deadline for filing the credit claim.

Can the C3i be combined with ESSOR and other assistance?

The C3i can form part of a broader financing structure, but stacking must be calculated under each program’s rules. ESSOR, for example, may support an investment or digital transformation project through financing or assistance under the relevant stream, while the C3i applies to specified expenses for particular assets.

Our ESSOR program guide and overview of Quebec manufacturing automation grants explain other potential sources of support.

It is best to establish the funding mix before signing contracts. Assistance attributable to the cost of property may reduce the C3i base, and another program may prohibit or cap stacking. The gross amounts of each incentive should not simply be added together without adjustment.

How to claim the C3i from Revenu Québec

The corporation claims the credit with its Quebec income tax return. It must complete form CO-1029.8.36.II, enter code 109 and submit the prescribed supporting documents.

Revenu Québec requires documents that include:

• an invoice detailing the cost of each property;
• the acquisition or capital lease agreement;
• a property schedule showing the description, date, supplier, pre-tax cost, payment dates, new or used status, capital cost allowance class and region of use;
• the corporate organization chart and related persons or partnerships;
• the cumulative-limit allocation agreement, when applicable.

The claim may be filed no later than the last day of the 12-month period following the filing deadline for the corporation income tax return for the year. Since the ordinary return deadline is generally six months after the taxation year-end, this rule will often produce a date 18 months after year-end. The legal wording nevertheless remains tied to the return’s filing deadline.

Revenu Québec’s C3i page provides the current list of forms and documents. An English courtesy translation of the claim form is also available, although the official version is French.

Planning the C3i before ordering assets

The right time to assess the C3i is before issuing a purchase order. Early planning allows the corporation to confirm the tax class, separate costs, verify the location of use, identify associated corporations and measure the effect of other assistance.

An asset-by-asset register should then retain quotes, agreements, invoices, proof of payment, in-service dates, locations and evidence supporting the 730-day use requirement.

To assess your project and build a coherent financing scenario, book a consultation with the Avinova team and review our grants and tax credits directory.

FAQ

What is the maximum C3i tax credit rate in 2026?

The maximum rate is 25% for specified expenses incurred after December 31, 2023, for property used primarily in a low economic vitality territory. The rate is 20% in an intermediate territory and 15% in the Montréal and Québec metropolitan communities. The rate applies after the exclusion threshold and other required adjustments.

Is an ERP or CRM system eligible for the C3i?

It may be eligible if it is a class 12 eligible management software package and performs the functions in the tax definition, such as integrating business processes, managing multi-channel customer relationships or managing a supply chain. A cloud subscription or software package with a limited function is not automatically eligible.

Is the C3i refundable if the corporation has no income tax payable?

Yes. The credit is fully refundable for specified expenses relating to a taxation year beginning after December 31, 2023. The corporation must still qualify, remain within the cumulative limit and file the forms and supporting documents on time.

What is the deadline to acquire eligible property?

Under the rules currently in force, specified property must be acquired before January 1, 2030. Acquisition before that date does not guarantee the credit: the property, expenses, use in Quebec, contractual dates and all other conditions must also be validated.