Here are the key points to remember: The inclusion rate remains at 50%

The increase in the capital gains inclusion rate that had been announced for 2024 has finally been abandoned.

The reform notably included increasing the inclusion rate from 50% to 66.67% on the portion of annual earnings exceeding $250,000 for individuals, as well as on earnings realized by corporations and certain trusts.

The federal government, however, abandoned this increase. Quebec then announced that it was aligning its tax system with this decision.

In 2026, the proportion of net capital gains included in income calculations will therefore generally remain at 50% in Quebec. (Quebec Ministry of Finance, 2025)

In practical terms, a capital gain of $100,000 generally means that $50,000 is included in the calculation of taxable income.

Note: This does not mean that 50% of the gain is paid in tax. The actual amount of tax depends in particular on the taxpayer's other income, available deductions, and the nature of the transaction.

A significant tax break for business owners

For entrepreneurs, the cumulative capital gains exemption remains particularly attractive when it comes to selling shares of a company.

In Quebec, for dispositions made after the 2025 taxation year, the amount of the exemption applicable in particular to eligible shares of a corporation that operates a small business is $1,275,000.

This potentially represents a considerable tax advantage when selling a business.

But there is an important nuance:

Shares in a company are not automatically eligible for this exemption.

Several criteria must be met.

The Canada Revenue Agency includes conditions relating to the holding of shares during the 24 months preceding their disposition and the proportion of the company's assets used primarily in a business actively carried on in Canada.

That is why it can be relevant to start thinking about the taxation of a sale well before finding a buyer.

Why the company structure must be analyzed before a sale

Over time, a company can accumulate various assets: excess cash, investments, or other assets that are not directly related to its current operations.

The composition of assets is one of the factors that can be considered in determining whether shares meet the criteria for qualified small business corporation shares.

Depending on the situation, a corporate reorganization or other tax strategies may therefore be considered before a transaction.

The goal is not simply to sell the company.

It is also important to ensure that the structure in which it is sold meets the entrepreneur's tax and financial objectives.

Sale of shares or sale of assets?

This is also a fundamental distinction when a company changes hands.

In a share sale, the shareholder sells their shares of the company to the buyer.

In an asset sale, it is rather certain assets of the company that are sold: equipment, buildings, inventory, customer base, goodwill or other assets.

The tax consequences can vary greatly depending on the structure chosen.

This is why two transactions with exactly the same selling price can produce very different after-tax results.

Plan before you sign

A common mistake is to start tax planning when the terms of the transaction are already determined.

However, certain strategies need to be implemented early enough.

A preliminary analysis can, in particular, make it possible to verify eligibility for certain exemptions, to compare different transaction structures and to assess the tax consequences before concluding the sale.

Key takeaways for 2026

The picture is ultimately simpler than it seemed a few years ago:

The general rate of inclusion of capital gains remains at 50% in Quebec in 2026.**

For entrepreneurs, the cumulative capital gains exemption also remains an important factor to consider when selling certain eligible shares.

But in taxation, preparation can make all the difference.

Are you considering selling your business, a corporate reorganization, or a major transaction?

Partenariat Fiscal assists entrepreneurs throughout Quebec in the tax planning and structuring of their transactions.

Sources

Quebec Ministry of Finance — Update on Quebec's economic and financial situation, Fall 2025: cancellation of the increase in the capital gains inclusion rate.

Quebec Ministry of Finance — 2025 Tax Expenditures: Partial inclusion of capital gains*: inclusion rate of 50%.

Quebec Ministry of Finance — Limited capital gains exemption on eligible shares of a corporation carrying on a small business: $1,275,000 exemption for dispositions made after 2025.

Canada Revenue Agency — Qualifying small business shares: eligibility criteria applicable to shares.

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The information presented in this article is general in nature and provided for informational purposes only. It does not constitute tax, accounting, or legal advice. Each situation must be analyzed based on its specific facts.

Last updated: August 2026