Quebec IP Commercialization Tax Holiday: Who Qualifies?

Quebec IP Commercialization Tax Holiday: Who Qualifies?

If you are spinning a new company out of a university or public research centre in Quebec, taxes can be a major early-stage cost. The Quebec IP commercialization tax holiday was designed to reduce that burden by exempting eligible new corporations from Quebec income tax for up to 10 years. This measure helped research-based startups survive their most fragile growth phase.

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What Is the Quebec IP Commercialization Tax Holiday?

The official name of this measure is the Tax holiday for a new business created to commercialize intellectual property. It is a Quebec income tax exemption for corporations formed specifically to commercialize intellectual property (IP) that comes from public research in Quebec.

Key points:

• It applies to Quebec corporate income tax only, not Canadian federal tax
• The tax holiday can last up to 10 consecutive taxation years
• The benefit applies to income earned from eligible IP commercialization activities

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Who Qualifies for the Quebec IP Commercialization Tax Holiday?

Eligibility is strict. This measure targets a very specific type of business.

To qualify, your corporation must meet all of the following conditions:

1. You Are a New Corporation

• The company must be incorporated in Canada
• Incorporation must have occurred between March 19, 2009, and April 1, 2014
• The corporation must have started operating a commercialization business within 12 months of incorporation

This program is not open to newly incorporated companies today. It applies only to corporations created during the defined historical window that are still within their tax holiday period.

2. Your Business Commercializes Public Research IP

Your corporation must be set up to commercialize IP that:

• Comes from research conducted in Quebec’s public research sector
• Originates from a Quebec university or public research centre
• Is research developed by employees at Quebec universities or public research centres

Eligible IP usually includes:

• Patents
• Protected technologies
• Research-based processes or products

3. Your Revenue Comes Almost Entirely From Eligible Activities

• All or almost all of the corporation’s income must come from:
  • Actively operated, eligible IP commercialization businesses
• Earning income from unrelated or passive activities can cause you to lose the exemption

4. The Business Must Be Truly “New”

Your corporation must not have:

• Previously carried on all or part of another business
• Acquired an existing commercial operation before starting IP commercialization

In most cases, companies that acquire IP from another private business do not qualify, even if the IP originally came from public research.

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What Does the Tax Holiday Actually Cover?

The Quebec IP commercialization tax holiday provides:

• An exemption from Quebec corporate income tax
• Coverage for up to 10 taxation years
• Relief only on income from eligible commercialization activities

It does not cover:

• Canadian federal corporate income tax
• Payroll deductions
• Sales taxes (GST/QST)

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How to Apply

This program is no longer open to new applicants. Only corporations that were incorporated between March 19, 2009, and April 1, 2014, and that are still within their 10-year tax holiday period, can continue to claim the exemption.

If your corporation is eligible and still within its tax holiday period, you must:

1. Ensure all incorporation and business activity dates fit the required window.
2. Keep detailed records showing that the IP comes from a Quebec public research institution.
3. File the relevant Quebec tax forms each year to claim the exemption.
4. Maintain documentation to prove that almost all revenue comes from eligible IP commercialization.

If you are unsure about your eligibility or need help with the application process, consider consulting a Quebec tax professional. GrantHub tracks hundreds of Quebec grant and tax programs, so you can review options that fit your business profile.

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Common Mistakes to Avoid

Assuming it applies to new startups today
This measure only applies to corporations incorporated within the defined historical period. Many founders miss this critical cutoff.

Thinking Canadian federal taxes are included
The tax holiday applies only to Quebec income tax. You still owe federal corporate tax to the Government of Canada.

Earning revenue from non-IP activities
If your company earns too much from non-eligible activities, you can lose the exemption for that year.

Buying IP from a private company
Commercializing IP acquired from a private business usually disqualifies you, even if the IP was originally developed in a public institution.

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Frequently Asked Questions

Q: How long does the Quebec IP commercialization tax holiday last?
The tax holiday can last up to 10 consecutive taxation years, as long as the corporation continues to meet eligibility requirements.

Q: Does this tax holiday apply to Canadian federal corporate income tax?
No. It only applies to Quebec income tax. Federal corporate taxes still apply in full.

Q: What types of intellectual property qualify?
Eligible IP is research developed by employees at Quebec universities or public research centres.

Q: Can a company that acquired IP qualify?
Usually not. Companies that acquire IP from another business do not qualify unless very specific conditions are met and the business is still considered new.

Q: Is the tax holiday considered taxable income?
No. It is an income tax exemption, not a grant payment. However, it may affect how other tax credits are calculated.

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Related Topics You May Want to Explore

• How University Spin-Offs Can Get Funding in Quebec
• Impulsion PME vs Other Quebec Startup Funding Programs
• Eligible Expenses Under Regional Economic Development Grants in Quebec (CED)

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Next Steps

If your company was created to commercialize public research IP and falls within the eligible period, this tax holiday could still be a major advantage. Tools like GrantHub’s eligibility matcher can help you quickly confirm whether this measure — and other Quebec tax credits — apply to your business profile. GrantHub tracks hundreds of active and legacy grant and tax programs across Canada, so you can see what funding or credits still fit your situation.

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