China released major reform measures of its individual income tax system over the weekend, a move that analysts expect will ease the burden on taxpayers, boost consumption and stabilize economic growth.
The revised rules of the individual income tax law and special individual income tax deductions will take effect on Jan 1, according to statements from the State Council on Dec 22.
nclusive and structural tax cuts will be implemented in 2019, with priority on easing the burden on manufacturing as well as for small and micro-sized businesses, Minister of Finance Liu Kun told a national fiscal work conference held on Dec 27 and 28.
Technology startups will also be offered tax cuts and exemptions, the minister said.
He pledged “more significant” fee reductions with moves to better regulate local fee charging.
Reform of the individual income tax — one of three major contributors to China’s treasury, along with value-added taxes and enterprise income taxes — mainly focused on adjustments to tax brackets and standard deduction increases, as well as new specific additional deductions.
The amended regulations also offer special expense deductions and introduce larger tax incentives for qualified foreign talent.
Specific additional deductions were introduced for the first time and comprise one of the most important parts of overall fiscal reform.
Taxpayer expenditures in six areas can now enjoy deductions — children’s education, continuing education, health treatment for serious diseases, interest on home loans, rent and elderly care.
It was the first big move after the annual Central Economic Work Conference wrapped up on Dec 21. At the meeting, top-level policymakers agreed to step up larger-scale tax cuts and keep fiscal policies more proactive to support economic growth next year.
Specific additional deductions were introduced for the first time and were announced over the weekend. They include six areas: children's education, continuing education, healthcare treatment for serious diseases, mortgage interest, rent and eldercare.
The new rule, adopted by the State Council, will take effect on Jan 1 after a new threshold of 5,000 yuan for monthly incomes was introduced in October for basic deductions from taxable personal incomes.
Cheng Lihua, vice-minister of finance, said taxpayers can deduct 1,000 yuan from their taxable income each month if they have a child older than 3 years, and until children complete their college study.
For continuing education, a monthly deduction of 400 yuan is available for taxpayers for up to 48 months. If technicians undertake continuing education, they can deduct 3,600 yuan in the year they receive certificates.
Taxpayers and their spouses can deduct 1,000 yuan per month if they are first-time mortgage holders. For rent, deductions vary for different cities, with residents of larger cities being eligible for bigger deductions.
Single-child taxpayers who have one or two parents older than 60 to care for can deduct 2,000 yuan per month. If there is more than one child, each will be able to deduct up to 1,000 yuan.
China's economic growth is within a reasonable range, but faces downward pressure, Cheng said. Greater tax reduction measures and administrative streamlining have been introduced to boost market vitality.
(Source: ourjiangsu.com)
