Confirmation of Registration Report They say nothing is certain in life but death and taxes. We pay taxes on a daily basis but often try to avoid the thought of death at all costs. Unfortunately, the cost to your loved ones if you do not plan for your estate in the event of your death can be abundant; and it […]

As of July 1, 2018, the Financial Services Commission of Ontario (FSCO) will begin enforcing the changes to the O. Regulation 188/08 Mortgage Brokerages Standards of Practice under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) that affect non-qualified syndicated mortgages.To recap a qualified syndicated mortgage is a syndicated mortgage (a mortgage where there is more than one lender) that meets ALL of the following requirements:A licensed mortgage brokerage was involved in negotiating or arranging it.The mortgaged property secured was:Primarily used for residential purposes;Did not contain more than four (4) dwelling units (remember sometimes lenders will classify multiplexes as commercial or entirely residential depending on the number of dwelling units disregarding actual zoning and use);Did not contain more than one non-residential (commercial) unit, if within a mixed use building with other residential units (again up to four (4) in total).

The Question being asked is a brother or sister of a shareholder of a mortgage investment corporation (MIC) a specified shareholder (To qualify as a MIC for purposes of the Act, a corporation must, throughout the taxation year, meet the conditions in subsection 130.1(6) of the Act. Paragraph 130.1(6)(d) of the Act requires that the number of shareholders of the corporation be not less than 20 and that no one shareholder hold, directly or indirectly, more than 25% of the issued shares of any class of the capital stock of the corporation. However, subsection 130.1(8) of the Act provides an exception which deems the corporation to have complied with paragraph 130.1(6)(d) of the Act throughout the first taxation year in which it carries on business if the test in paragraph 130.1(6)(d) of the Act is met on the last day of its first taxation year.) for purposes of the definition of MIC in 130.1(6)? For purposes of determining if an RRSP annuitant has a significant interest in an investment, for purposes of the RRSP prohibited investment rules, is, for example, the annuitant’s brother or sister a specified shareholder?

The Quick and Simple is that Yes, withholding taxes (usually 25% of gross amount unless subject to a tax treaty with the resident country of the payee) do apply on Dividends paid out by a Mortgage Investment Corporation (MIC), even though they are Dividends for all intensive purposes under the Canadian Income Tax Act (dividends do not normally call for a withholding of tax when paid to non-residents).  The latest tax ruling (here is the link: http://taxinterpretations.com/?p=20952) specifically outlines the following reasons and expected interpretations under the Canadian Income Tax Act regarding paying out dividends to foreign investors in a Mortgage Investment Corporation (MIC):”Principal Issues: Whether a favourable ruling could be issued that the deemed interest payments paid to non-resident shareholders of a MIC would not fall within the meaning of PDI such that the payments would be exempt from Part XIII tax.Position: We were unable to provide a favourable ruling.

Over the last few years, and especially since the financial crisis of 2008, the concept of Islamic financing or banking has been gaining momentum as an alternative financial model for lending and banking. In the UK for example, since 2013, there has been a wider acceptance of this model of financing, and in fact there has been a wide push by the government for the creation of Islamic compliant investment opportunities, both for the domestic market’s consumption, and as a means of attracting foreign investment in the UK financial market.Here in North America the model has garnered some attention, and in fact currently there are few lending companies that offer Islamic compliant financing options, however the model has not been seen as attractive enough or in demand enough to be created and offered as a product.The attraction to this model of financing and banking is primarily due to the fact that Islamic financing puts emphasis and operates on the notion of shared risk between the lender and the borrower, as oppose to the traditional western style banking and financing. That is why this model garnered more attention after the financial crisis of 2008.

So you looked up a few websites on incorporating, stumbled upon the government sites for filing articles of incorporation and decided to fill in the forms and submit.  You pay the same filing fee your lawyer would and think you just did “their job” for nothing.  Well, what you did was a disservice to yourself and your partners/shareholders.  Most startups need to save money, but the last place you need to skim is when setting up your business structure.  Most startups who incorporate themselves stop with the articles of incorporation, never providing for the basic necessary resolutions and by-laws commonly found when first incorporating, not to mention maintaining a proper record of your shareholders, directors, officers, shares issued and redeemed, as well as the capital invested.Why is this important?  Well, you may be thinking that because you haven’t even started any type of business operation or completed whatever it is you are building that focusing on anything other than the “name” is a waste of time.  Did you know that technically without issuing any shares by receiving whatever notional amount on startup in exchange for actual shares issued evidenced by a share certificate, the company does not yet exist?

One of the biggest challenges in running a MIC is when you first realize that the investors who were once your private lenders are now expecting the equivalent of their monthly interest cheques however in the form of a dividend.  With a mortgage, a private lender is accustomed to receiving a monthly cheque of interest only (usually).  The formula is simple, the private lender is expecting the equivalent of the monthly interest rate applied to the principal outstanding on the loan they funded.  With a MIC however, there is no direct attribution of the investor’s investment, through the purchase of MIC shares, with any of the investments the MIC makes, such as mortgage loans.  Hence your once private lender, now turned investor/subscriber in the MIC, has no way of knowing what they will earn except for the expectations you leave them with.The challenge as a newly started MIC should mean no such expectations at all.  Securities law and regulations require that you provide information only based on actual facts and not on a forward looking basis.

Mortgage Investment Corporations (“MICs”) are on the rise in Canada.  With many of these MICs the founders and managers are confused over what regulators may or may not govern certain aspects of running their business as a mortgage lender, a mortgage dealer or arranger such as mortgage broker or agent, a mortgage administrator and being in the business of raising money for the MIC.Depending on how one operates and manages their MIC, the following is a very brief and generalized overview of which regulators may govern how you operate in Ontario.First, and foremost a MIC’s primary purpose should be to qualify as a Mortgage Investment Corporation defined under section 130.1 of the Income Tax Act (Canada), which is further explained here.  This would therefore mean that every MIC would first be regulated and governed by the Canada Revenue Agency (“CRA”) in determining if at all the operations and capital structure of the corporation qualifies the MIC as one.

New doctors often face the question of whether to incorporate or not early on in their practice. In that regard the question that I am most often asked is whether incorporating a medical practice is necessary, and what are its advantages. While the answer to these questions depends on many different factors, below are some of the factors that new doctors should have in mind when making the decision.Under the Regulated Health Professions Act, medical professionals are permitted to establish corporations for the purpose of practicing medicine. In Ontario, these medical professional corporations must be incorporated under the Ontario Business Corporations Act. While liability protection is generally the main non-tax reason for incorporation, a professional corporation does not provide the same limitations on liability as a regular corporation. In other words, as a doctor you may be sued for malpractice and your professional corporation will not provide any additional limitations on the liability faced. The only limitation that the professional corporation will provide is in the form of some protection from creditors if capital was borrowed in the form of loans for such things as financing an office or medical equipment. In such instances, the professional corporation will shield its shareholders from personal liability should the corporation be unable to meet its responsibilities under the loan.

What do you do when your mortgage lender now has to pay a higher interest rate to their own lender on the money they loaned to you?Home Trust in crisis!”Home Trust would be required to pay a non-refundable commitment fee of $100 million and make an initial draw of $1 billion. The interest rate on outstanding balances would be 10 per cent, and the standby fee on undrawn funds would be 2.5 per cent, Home Capital added.Gloyn said this translates to an effective interest rate of 22.5 per cent on the first $1 billion, declining to 15 per cent if fully utilized.””Home Capital Group Inc. said Wednesday its subsidiary, Home Trust, has seen deposits drop by nearly $600 million in recent weeks and it is seeking a $2 billion credit line to mitigate the impact, which it expects to accelerate.