Electric vehicles will be exempt from annual taxes starting from Jan 1 next year, according to a draft regulation by China's State Council.

The central government released the draft on its website to solicit public opinions until mid-July.

The draft says that pure electric, fuel-cell and plug-in hybrid vehicles are exempt from the tax, while other hybrid vehicles are eligible for a 50 percent cut.

The draft regulation contains detailed implementation rules for a new vehicle and vessel tax law that was approved by the nation's top legislator in February.

The new regulation also levies taxes in relation to car engine displacement.

The tax on cars with a 1.6-liter engine or below will range from 60 to 540 yuan a year, while autos with engines bigger than 3.0 liters will pay from 2,400 to 5,400 yuan.

Previously, the same tax was levied onvehicles regardless of engine displacement.

The latest move is in line with preferential policies implemented by the central government to support development of new-energy and energy-saving vehicles.

The government began offering a maximum subsidy of 60,000 yuan to users of pure-electric cars and 50,000 yuan to users of plug-in hybrids in five pilot cities in June last year.

Local governments in Shenzhen and Shanghai provide additional subsidies for new-energy vehicles.

The Beijing municipal government plans to exempt buyers of new energy vehicles from the license plate lottery that the city began at the end of last year to cut new car sales in the congested city.

The central government also offers a subsidy of 3,000 yuan to buyers of cars with engines smaller than 1.6 liters.