Delivering a budget for the future, Deputy Prime Minister and Minister for Finance Tharman Shanmugaratman announced Budget 2012 on 17 February 2012.

The Government also reported a strong fiscal position in 2011. Higher income tax collections, stamp duties and lower claims for capital allowances boosted revenues and led to an Overall Budget Surplus of about S$2.3 billion or 0.7% of GDP for FY2011.

With Singapore's economic growth at 4.9% in 2011 and a projected slowdown this year of between 1% and 3%, Budget 2012 will focus on building an inclusive society and a stronger Singapore through:

• upgrading and restructuring the economy
• slowing foreign worker dependency
• enabling Singaporeans to earn better incomes
• stepping up social policies for elderly, those with disabilities and lower-income families

Read the Singapore Budget 2012 Business eFlyer brochure .

Restructuring to Sustain Growth

The first major priority of the Budget is to restructure the economy and develop basic skills, innovation and productivity.

Managing Dependence on Foreign Workers

• The Government will moderate the growth of the foreign workforce, and in the long term, avoid its proportion of the total workforce increasing steadily beyond one-third.
• New applications for Employment Pass (EP) are now subject to tighter criteria and higher qualifying salaries.
• A calibrated reduction in Dependency Ratio Ceilings (DRCs) in the manufacturing and services sectors will be reduced from 1 July 2012:
  • 65% to 60% for Manufacturing sector
  • 50% to 45% for Services sector
• For existing foreign workers, companies will be given until June 2014 to comply with the new DRCs. The 2-year transition recognises that many companies would have already invested in their existing workers.
• There will also be a tightening in the Construction sector. Besides the reduced S Pass DRC, Man-Year Entitlement (MYE) quotas will be reduced by 5% in July 2012.

Special Employment Credit for Older Workers

• All employers will receive a Special Employment Credit (SEC) for their Singaporean workers above 50 years old and earning up to S$3,000 per month.
• The SEC will be 8% of wages.
• A lower SEC will also be provided for workers with a monthly wage of between S$3,000 and S$4,000.
• The SEC will cover almost 350,000 workers or four-fifths of older Singaporean workers.

SME Cash Grant

• To help companies offset higher business costs, a one-off cash grant will be given to SMEs.
• Companies will receive a cash grant pegged at 5% of their revenues in Year of Assessment (YA) 2012, capped at a payout of S$5,000.
• Companies will receive the grant as long as they have made CPF contributions to at least one employee.

Transforming through Productivity and Innovation

The second objective of the Budget is to boost economic growth and productivity. S$2 billion will be allotted to the National Productivity Fund for this.

Enhancement of Productivity and Innovation Credit (PIC) Scheme

• Businesses will be given more cash upfront for their investments through a 60% cash payout enhancement for up to S$100,000 of firms' PIC expenditures. This means a S$60,000 payout from the Government, compared to the S$30,000 previously.
• Business will get their cash payout faster. From 1 July 2012, companies will be able to apply for and obtain their cash payouts on a quarterly basis.
• Companies can claim PIC benefits on their in-house training not certified by Singapore Workforce Development Agency (WDA) or Institute of Technical Education (ITE), up to S$10,000 a year.
• The cash payout will be extended from YA 2013 to YA 2015. The cash payout cannot be combined on expenditure across the 3 YAs.

Enhanced Training Support for SMEs

• A 90% course subsidy will be given for SMEs who upgrade their workers through courses certified by WDA and academic Continuing Education and Training (CET) programmes, covering almost the full cost of training.
• The Government will increase absentee payroll cap from S$4.50 to S$7.50 an hour.
• Similar training benefits will also be provided to self-employed persons such as taxi drivers and freelancers.

Grants to Support SME Training and Productivity

• Grants for capability development amongst SMEs will be increased from the current 50% to a 70% subsidy rate for the next 3 years under schemes managed by SPRING Singapore and International Enterprise (IE) Singapore.

Renovation and Refurbishment Deduction Scheme

• The scheme will now be a permanent feature of the tax system.
• Expenditure for claims will be doubled from S$150,000 to S$300,000.

Mergers and Acquisitions Allowance Scheme

• There will be a 200% tax allowance on transaction costs incurred such as legal and tax advisory fees, subject to an expenditure cap of S$100,000.
• The allowance on transaction costs will be written down in 1 year.

Simplifying Capital Allowance Claims for Low-Value Assets

• To further ease the claiming of capital allowances, the full cost of each asset that may be written down in 1 year will be increased to no more than S$5,000.

Introducing the Integrated Investment Allowance (IIA) Scheme

• The IIA scheme will provide an additional allowance on fixed capital expenditure incurred for productive equipment placed on approved projects.
• The change will take effect from YA 2013 and will run for 5 years.

Enhancing the Double Tax Deduction (DTD) for Internationalisation Scheme

• To  further encourage SMEs to venture abroad and reduce the administrative burden on businesses, a tax reduction of up to 200% may be allowed on qualifying expenditure, up to S$100,000 per YA without the need for approval from IE Singapore or Singapore Tourism Board.

Granting GST Exemption on Investment Grade Gold and Precious Metals

• To develop a new refining and trading cluster in Singapore, the import and supply of investment-grade gold and precious metals  will be treated as exempt supplies, similar to the supply of financial services.
• Measures will be introduced to ease cash flow and compliance of qualifying refiners and local consolidators of precious metals in the payment of input GST on import and purchase of raw materials.
• Changes will take effect from 1 October 2012.

Extending the GST Temporary Period from 3 to 6 Months

• To provide businesses with greater flexibility, the temporary import relief period of 3 months will be extended to 6 months.
• This change will take effect from 1 April 2012.

Other Tax Measures

• The Government will raise the excise duties for beedies, “ang hoon” and smokeless tobacco by 20%, and unmanufactured tobacco by 10%.
• To capitalise on the growth of international cruise tourism, the GST Tourist Refund System (TRS) will be extended to international cruise passengers departing from the Singapore Cruise Centre at Harbourfront and the new International Cruise Terminal at Marina South.
• The Carbon Emissions-based Vehicle Scheme allows car models with low carbon emissions to enjoy generous rebates on their Additional Registration Fee (ARF) of up to S$20,000, while those with high carbon emissions will have to pay a registration surcharge of up to S$20,000.

A Fair and Inclusive Society

• CPF contribution rates will be raised for three groups of Singaporeans from September 2012:
  • Aged between 50 and 55: +2.5%
  • Aged between 55 and 60: +1.5%
  • Aged between 60 and 65: +0.5%
• Government will also double the Earned Income Relief (EIR) for those aged 55 and above.
  • Aged between 55 and 59 years: S$6,000 in EIR per annum
  • Aged 60 and above: S$8,000 per annum