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:

  • A MIC must have at least 20 shareholders.
  • No shareholder may hold more than 25% of the MIC’s total capital.
  • 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.
  • A MIC may invest up to 25% of its assets directly in real estate, but may not develop land or engage in construction.
  • A MIC is a flow-through investment vehicle and distributes 100% of its net income to its shareholders.
  • Dividends received with respect to directly held shares, not held within RRSPs or RRIFs, are taxed as interest income in the shareholder’s hands.
  • A MIC’s annual financial statements must be audited.
  • A MIC may employ financial leverage by using debt to partially fund assets.