How is capital gains tax applied when I sell my business in Quebec?

A Quebec seller deals with two tax authorities on the same sale. The CRA administers the federal return, and Revenu Québec administers the Quebec return. This page covers the Quebec side only and is about an individual who sells shares or property at a gain. It does not cover Quebec’s sales taxes or how the sale is structured, which the guide to tax on selling a business in Quebec addresses.

Where the gain goes on the Quebec return

Revenu Québec says a filer may have to report a capital gain or loss from disposing of qualified farm or fishing property or qualified small business corporation shares, including shares covered by an intergenerational business transfer. The gain or loss is calculated on schedule G, and the taxable capital gain is carried to line 139 of the Quebec return. Shares covered by a qualifying business transfer to an employee ownership trust are also listed there.

Quebec’s own capital gains deduction

If you report a taxable capital gain at line 139, Revenu Québec says you may be entitled to a deduction for it at line 292 when you meet two conditions. The gain must come from disposing of qualified farm or fishing property, qualified small business corporation shares, intergenerational transfer shares or certain resource property, and you must meet the test of residence in Canada that the line sets out for the year. Form TP-726.7 is attached for qualified farm or fishing property or qualified small business corporation shares, and form TP-726.20.2 for resource property. A separate deduction at line 291 may be available, if certain conditions are met, for a gain on shares covered by a qualifying business transfer to an employee ownership trust. It equals the amount deducted for it at line 25395 of the federal return, and a copy of all documents sent to the CRA about that deduction must be attached to the Quebec return.

Quebec tests eligibility under its own Act

Quebec’s Taxation Act gives a qualified farm or fishing property the meaning set out in section 726.6, and a qualified small business corporation share the meaning set out in section 726.6.1. Eligibility for the Quebec deduction is therefore tested under those sections. The federal deduction is claimed separately, at line 25400 of the federal return, as the CRA describes it. Ask your accountant to confirm eligibility under each Act rather than assuming one answer covers both.

What Revenu Québec said about the inclusion rate

In a tax news item dated 5 February 2025, Revenu Québec reported that Quebec’s Ministère des Finances had announced that Quebec would harmonize with the federal deferral of the capital gains inclusion rate change to 1 January 2026. It stated that gains realized before that date would stay at the existing inclusion rate, unless an exemption or incentive applied. Check the current rate with Revenu Québec or an accountant before you plan around it.