(Bloomberg) -- China released a detailed draft plan for personal income tax cuts on Saturday, as the nation's economic growth slowed to the weakest pace since the aftermath of the global financial crisis in 2009.
Taxpayers can claim deductions for expenses on health care, education, mortgage interest or rent and supporting elderly relatives, state-run Xinhua News Agency reported, citing the draft plan released by the Ministry of Finance and State Administration of Taxation. The deductible amount under each category ranges from 1,000 yuan ($144) per month to 2,000 yuan per month, according to the plan.
The announcement had been widely expected after China raised the personal income tax-free threshold to 5,000 yuan per month from 3,500 yuan earlier this year. Premier Li Keqiang said last month that the nation will push for more significant tax cuts and officials from the Ministry of Finance also indicated that more measures were underway this month.
The move to reduce tax burden on its household came as the world's second-largest economy has been facing increasing headwinds this year, with simmering trade tensions and a slumping stock market hurting confidence in the outlook. It might help support consumption, the major engine for China's economic growth and a cushion against external shocks.
Read: Growth in Per-capita Consumption Moderated in China
The draft plan will have a two-week public comment period and the final changes will take effect from Jan. 1, 2019, according to Xinhua. Below are some highlights in the plan
- Taxpayers can claim 12,000 yuan per year for each child's education costs, and 3,600 yuan to 4,800 yuan for continuing education expenditure on themselves.
- Deduction amount for supporting parents over the age of 60 is 24,000 yuan per year, which would be equally split between siblings.
- Rent deduction ranges from 800 yuan in small cities to 1,000 yuan in mid-sized ones and 1,200 yuan in big cities.
- As for medical care, taxpayers can claim as much as 60,000 yuan per year should their expenses exceed 15,000 yuan after public health insurance coverage.
- Mortgage interests deduction only applies to the first home, and can only be enjoyed by one of a married couple. The set amount is 12,000 yuan per year.
--With assistance from Stephen Tan.
To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, John McCluskey, James Thornhill
©2018 Bloomberg L.P.
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