What is a MIC

A Mortgage Investment Corporation (MIC) is a 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. Shares of a MIC are eligible investments under the Income Tax Act (Canada) for RRSPs, RRIFs, DPSPs, or RESPs and TFSAs.

A MIC mortgage portfolio can include everything from a small second mortgage on residential property to commercial and development mortgages on new projects. A typical MIC loan does not exceed 75%-85% of the current value of the property. The rules for MICs, which are flow-through instruments (meaning that tax is not paid by the company, only its investors), are found in the Tax Act, and include the following:

1. A MIC must have at least 20 shareholders.
2. No shareholder may hold more than 25% of the MIC’s total capital.
3. At least 50% of a MIC’s assets must be 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. Dividends received with respect to directly held shares, not held within RRSPs or RRIFs, are taxed as interest income in the shareholder’s hands.
7. A MIC’s annual financial statements must be audited.
8. A MIC may employ financial leverage by using debt to partially fund assets.