M.I.C. Regulations

The Tax Act’s MIC Criteria

Section 130.1 of the Tax Act sets out the criteria governing a MIC, and in summary says that in order to qualify as a MIC for a taxation year, a company must have met the following criteria by the end of its first fiscal year, and maintained these criteria throughout every fiscal year thereafter:

  1. Its only undertaking was the investing of its funds and it did not manage or develop any real property;
  2. It did not invest in:
    1. Mortgages secured by real estate located outside Canada, or property outside Canada;
    2. Shares of companies not resident in Canada; or
    3. Real property or leasehold interests outside Canada.
  3. It has at least 20 shareholders, and no one shareholder together with related parties to that shareholder held between them more than 25% of the issued shares of any class of shares of the company;
  4. At least 50% of the company’s assets were comprised of:
    1. Loans secured on houses or on property included in a housing project, as those terms are defined in the National Housing Act (Canada);
    2. Deposits insured by the Canada Deposit Insurance Corporation (“CDIC”) (or Quebec DIC);
    3. Deposits in a credit union; and/or
    4. Cash.
  5. No more than 25% of the company’s assets consisted of real property (excluding any real property acquired by foreclosure).

The Fund operates as a tax-efficient conduit of profit to its shareholders.
The Tax Act’s MIC criteria permit revenue sources other than residential mortgages, including among other things equity investments in real estate, investments in stocks and securities of Canadian companies, and mortgage lending in respect of commercial real estate. Notwithstanding its ability to invest in the array of investments allowed under the Tax Act, it is the Fund’s policy to invest its non-CDIC-insured holdings in mortgages secured by real estate located in Canada, primarily residential real property. A MIC’s only permitted undertaking under the Tax Act criteria is the investing of its funds, and it is specifically prohibited from managing or developing real property.
https://www.ontario.ca/laws/statute/90i02

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