A Mortgage Investment Corporation (MIC) is an investment and lending company designed specifically for mortgage lending in Canada. Owning shares in a MIC enables investors to participate in income from a diversified and secured pool of mortgages. Mortgage investments offer a significant advantage over equity investments; mortgages are legally secured against the real estate of the borrower. That security provides collateral for the debt obligation.

 

Shares of a MIC are eligible investments under the Income Tax Act for inclusion in an RRSP, RRIF, RESP, TFSA or DPSP.

 

Mortgage Investment Corporations are a compelling choice for Canadian investors due to the fact MIC’s: must distribute 100% of their annual net income before taxes to shareholders in the form of a dividend; offer favourable tax treatment if held in a registered investment; spread risk across a pool of mortgages instead of an individually held mortgage; and are professionally managed.

 

Mortgage Investment Corporations are governed by the tax regulations of the Income Tax Act of Canada and are treated for tax purposes as a “flow-through” entity. As such, the income of a MIC is not subject to corporate income tax. The net income of the MIC “flows-through” and is paid directly to the shareholders. This “flow-through’ advantage results in more income in the hands of the shareholders and avoids the “double taxation” that occurs with most investments.

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Income Tax Act, Section 130.1 - the notable rules;

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  1. A Mortgage Investment Corporation must have at least 20 shareholders.

  2. A MIC is generally widely held. No shareholder may hold more than 25% of any class of the MIC’s capital.

  3. At least 50% of a MIC’s assets must be comprised of residential mortgages, and/or cash and insured deposits at Canada Deposit

      Insurance Corporation member financial institutions.

  4. A MIC may invest up to 25% of its assets directly in real estate, but may not develop land or engage in construction.

  5. A MIC is a flow-through investment vehicle, and distributes 100% of its net income to its shareholders. 

  6. All MIC investments must be in Canada, but a MIC may accept investment capital from outside of Canada.

  7. A MIC is effectively a tax-exempt corporation.

  8. Dividends received are taxed as interest income in the shareholder’s hands. Dividends may be received in the form of cash or 

      reinvested in additional shares through our dividend reinvestment program.

  9. MIC shares are qualified investments for RRSP, RRIF, RESP, TFSA, and DPSP investments.

10. A MIC’s annual financial statements must be audited.

11. A MIC may employ financial leverage by using debt to partially fund assets.

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