The Chinese government announced Sunday that it has set favored taxation policies for the nation's knowledge-based enterprises.

According to the incentive policies, which are aimed at encouraging scientific and technological innovation, R&D expenditures can be deducted from annual tax returns at a rate of 150 percent.

The State Council also urged the state taxation authorities to study and draft a uniform taxation policy that stimulates further coordination between research institutes and the industrial sector.

Newly-established hi-tech enterprises in national hi-tech zones will be exempt from taxes for two years. After the period, hi-tech start-ups should only pay 15 percent of the taxes of traditional industries.

The State Council is also expected to issue favorable taxation policies to encourage exports of hi-tech products.

To further strengthen indigenous research capabilities, the State Council has exempt state key labs and R&D centers in enterprises from tariffs and value-added taxes on research equipments.

The State Council has also set up favorable taxation rates for venture capitalists, science and technology intermediaries, non-profit organizations and individuals who are working on innovation-related activities.