Three authorities, including the Ministry of Finance ("MOF"), have recently distributed the Circular on Tax Policies in Support of the Opening of the Crude Oil Futures Market and Other Commodity Futures Markets (the "Circular"), immediately effective from the issue date.
The Circular explicitly states that if a foreign institutional investor (or a foreign brokerage firm) has no establishment or office within the territory of China, or though it has an establishment or office in China, the income it obtains is irrelevant to such establishment or office in practice, the income obtained by such investor via domestic crude oil futures trading, excluding the income derived from the delivery settlement, is temporarily not subject to the enterprise income tax; where a foreign brokerage firm provides overseas investors with brokerage services at broad for their engagement in domestic crude oil futures, the commission income obtained by such firm therefrom is not considered as the income derived from labor services offered domestically and thus should not be subject to the enterprise income tax. Furthermore, the Circular stipulates that, from the date when crude oil futures are made open, the income obtained by an overseas individual investor from its investment in domestic crude oil futures will temporarily not be taxed for the individual income tax purpose in three years. For other commodity futures products that are made open upon approval of the State Council, the above-said provisions shall apply as well.