The Wuhan East Lake High-Tech Development Zone administrative committee announced on April 18 that the East Lake High-Tech Zone could pilot three "Early and Pilot Implementation" fiscal policies.

The three policies include deducting additional Research and Development Fee, increasing the proportion of pre-tax for the education funds of employees and allowing people to pay personal income taxes by installments for the equity incentive for a period of 3 years. The policies have been approved by the State Council, the Ministry of Finance, State Administration of Taxation (Jan 1, 2012 - Dec 31, 2014).

The policies indicate that the East Lake Demonstration Zone has made a major breakthrough in exploring a fiscal policy that supports independent innovation in the development of high-tech industries in the country.

According to the documents, the East Lake demonstration area could enjoy the following three preferential fiscal and taxation policies during the pilot period.

First, money spent on the "five insurances, one fund," including R&D personnel, R&D equipment maintenance fees and medical enterprise clinical trials could be included in the scope of additional deductions.

Second, the percentage of employee education expenses deducted before taxes will be increased from 2.5 percent to 8 percent. The exceeded amount will be carried forward to future tax years;

Third, personal income tax for staff, who need pay for efforts in scientific and technological achievements, in the form of equity shares or investment ratios, can be paid in installments within five years.

According to preliminary calculations, the East Lake demonstration area will directly help 481 high-tech enterprises with direct tax cuts. In 2012, taxes will be cut more than 50 million yuan ($8.09 million) directly.

Xia Yamin, the vice-director of the East Lake management committee, admitted that the current ratio of R&D expenses to sales income of an enterprise is not high. There is a huge gap compared with enterprises in developed countries. The most important meaning of the fiscal policy is to encourage enterprises to increase investment in R&D and equity incentives to promote scientific and technological innovation.

Zhou Qiguo, the vice-general manager of WISDRI Engineering & Research, said that this policy is good news for business. It will make the firm pay more attention to long-term development. The company will understand and use this policy to increase R&D investment, introduction of talent, technological innovation and enterprise development.