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THE 2012 BUDGET

The Deputy Prime Minister, Minister for Finance and Minister for Manpower, Mr. Tharman Shanmugaratnam, announced the 2012 Budget in Parliament on 17 February 2012. Highlights of the tax and other changes are as follows:

1Individual Tax Changes

• Wef YA 2013, the handicapped EIR for those aged below 55 will be increased to S$4,000, EIR and handicapped EIR for those aged 55 to 59 will be increased to S$6,000 and S$10,000 respectively and those aged 60 and above will be increased to S$8,000 and S$12,000 respectively.

• From 1 September 2012, CPF contribution rate for workers aged between 50 to 55 will be increased to 32.5%, workers aged between 55 to 60 will be increased to 23.5% and above 60 to 65 will be increased to 14.5%.

• Medisave contribution rate for those aged 50 and above will be raised to 9.5% wef January 2013.

2General Tax changes for Businesses

2.1 One-off SME Cash Grant for the YA 2012

Companies will receive a one-off non-taxable SME Cash Grant pegged at 5% of the Company’s revenue in YA 2012, capped at a payout of S$5,000, as long as they have made CPF contributions to at least one employee for the YA 2012.


2.2 Enhancing the Productivity and Innovation Credit ("PIC") Scheme

Wef YA 2012, the PIC Scheme is enhanced as follows:

• Cash Payout rate will be increased to 60% for up to S$100,000 of qualifying expenditure from the YA 2013 to YA 2015.

• Certification by Workforce Development Agency (“WDA”) or Institute of Technical Education (“ITE”) will not be required for qualifying in-house training expenditure incurred up to S$10,000 per YA.

• Expenditure incurred by a principal on the training of its agents may qualify for PIC subject to conditions.

• Qualifying expenditure (deemed to be 60% of shared costs) incurred on Research & Development (“R&D”) cost-sharing agreements may qualify as expenditure on R&D and enjoy PIC deduction.

• The multiple sales requirements will be removed to facilitate R&D in software development, not intended for sale.

• Wef YA 2012, qualifying automation equipment acquired on hire purchase with repayment schedule straddling two or more financial years will be eligible for the cash payout option.


2.3 Enhancing the Renovation and Refurbishment ("R&R") deduction scheme

Wef YA 2013, the R&R deduction scheme will become a permanent feature of the income tax regime with the expenditure cap doubled from S$150,000 to S$300,000 for each three-year period.


2.4 Enhancing the Merger & Acquisition (“M&A”) Scheme

200% tax allowance will be granted on the transaction costs (such as legal and tax advisory fees) incurred on qualifying M&A, subject to an expenditure cap of S$100,000 per YA. The allowance will be written down in 1 year.


2.5 Simplifying capital allowances claims for low-value assets

Wef YA 2013, the full cost of each asset that may be written down in one year will be increased to no more than S$5,000, capped at an aggregate claim for all such assets at S$30,000 for YA.


2.6 Integrated Investment Allowance ("IIA") Scheme

A new IIA Scheme is introduced to provide an additional allowance on fixed capital expenditure incurred for productive equipment placed overseas on approved projects wef YA 2013.

The existing Integrated Industrial Capital Allowance incentive will be withdrawn following the introduction of the IIA scheme on 17 February 2012.


2.7 Enhancing the Double Tax Deduction ("DTD") for Internationalisation Scheme

Tax deduction of up to 200% may be allowed on qualifying expenditure incurred on or after 1 April 2012, up to S$100,000 per YA, incurred on selected activities, without the need for approval from IE Singapore or STB.


2.8 Providing certainty of non-taxation of companies’ gains on disposal of equity investments

Gains derived from the disposal of equity investments on or after 1 June 2012 by companies will not be taxed, if:

• The divesting company holds a minimum shareholding of 20% in the company whose shares are being disposed; and

• The divesting company maintains the minimum 20% shareholding for a minimum period of 24 months just prior to the disposal.


2.9Extending the filing and payment deadline for withholding tax

Filing and payment deadline for withholding tax on payment made to non-residents on or after 1 July 2012 will be by the 15th of the second month following the date of payment to the non-resident.


2.10Enhancement of the Special Employment Credit ("SEC")

Employers will receive SEC of 8% of income for each Singaporean worker aged above 50 years old, who earns up to S$3,000 per month. Employers of Singaporean workers aged above 50 and earning between S$3,000 and S$4,000 will receive a lower amount of SEC. The enhanced SEC will be in place for 5 years (2012 to 2016).


3Sector-specific Tax Changes for Businesses

3.1Exempting vessel disposal gains derived by qualifying ship operators and ship lessors from tax

Wef 1 June 2011, qualifying ship operators and ship lessors under the Maritime Sector Incentive ("MSI") awards will be granted tax exemption automatically, without the need to opt for the exemption, on gains from the disposal of vessels.


3.2Exempting charter fees for ships from withholding tax

Wef 17 Feb 2012, payers making bareboat, voyage and time charter payments to non-residents for the use of ships will not have to withhold tax.


3.3Enhancing the Maritime Sector Incentive – Maritime Leasing ("MSI-ML") (Container) Award

• Interest and related payments, made on or after 17 February 2012, arising from loans taken to finance qualifying containers and intermodal equipment will be granted automatic withholding tax exemption; and

• Wef YA 2013, income derived from the leasing of intermodal equipment (e.g. trailers) which is incidental to the leasing of qualifying containers will also enjoy the concessionary tax rate of 5% or 10%.


3.4Extending and enhancing the Aircraft Leasing Scheme ("ALS")

ALS will be extended to 31 March 2017. ALS award recipients will be granted withholding tax exemptions automatically, subject to conditions, on interest and qualifying payments made on or after 1 May 2012 in respect of qualifying foreign loans entered into on or before 31 March 2017.


3.5Enhancing the liberalized withholding tax exemption regime for banks

Specified entities will not need to withhold tax on qualifying interest and other payments made to Permanent Establishments ("PEs") in Singapore from 17 February 2012 to 31 March 2021.


3.6Extending the withholding tax exemption for Over-The-Counter ("OTC") financial derivatives payments

Withholding tax exemption on all payments made on qualifying OTC financial derivatives will be extended to 31 March 2021.


3.7Extending the tax deduction for collective impairment provisions made under MAS Notices

Tax concessions on collective impairment provisions will be extended for three years till YA 2016 or YA 2017.


3.8Enhancing the designated investment and specified income lists for financial sector tax incentive schemes

Wef 17 February 2012, unless specifically excluded, all income derived from designated investments by the qualifying entities will qualify for tax exemption under the respective financial sector tax incentive schemes.


3.9Liberalising the cash distribution requirement for tax transparency for Real Estate Investment Trusts ("REITs")

On or after 1 April 2012, REIT that makes distributions to unit holders in the form of units can continue to enjoy tax transparency, subject to conditions.

Unit holders that elect to receive distributions in units will be taxed in the same manner as if they had received the distribution in cash.


4Goods & Services Tax (GST) Changes

• Wef 1 October 2012, the import and supply of investment-grade gold and precious metals will be treated as exempt supplies.

• Wef 1 April 2012, the temporary GST import relief period of 3 months will be extended to 6 months.

• Wef January 2013, TRS will be available to goods that are brought out of Singapore by international cruise passengers departing from the Singapore Cruise Centre at Harbourfront and the International Cruise Terminal at Marina South subject to conditions.

• Wef 1 April 2012, the GST import relief of S$150 and/or S$600 will be given for goods brought in by inbound travelers.


5Other Changes

• Wef 1 January 2013, special tax for Euro V compliant private diesel cars will be reduced to S$0.40 per cc of engine capacity, subject to a minimum annual payment of $400;

• Wef 1 January 2013, under the Carbon Emissions-Based Vehicle ("CEVS") Scheme, all new purchases of passenger car models with low carbon emissions will enjoy up to S$20,000 in rebates;

• Green Vehicles Rebates ("GVR") Scheme for commercial vehicles, buses and motorcycles will be extended by another two years till end 2014;

• Wef 18 February 2012, the transfer fee for all vehicles will be revised to S$11 and the Additional Transfer Fee abolished;

• Silver Housing Bonus of S$20,000 will be given to older Singaporeans who wish to sell their existing flats and purchase 3-room or smaller HDB flats;

• Lease Buyback Scheme incentives will be increased to S$20,000;

• Lower-income patients will receive a 75% government subsidy;

• IGST will be fully absorbed for Class B2 and C patients in acute hospitals and subsidised patients in the long term care sector;

• Increase in the payouts from Medifund by over 20%;

• MediShield coverage will be extended from age 85 to 90 and the Government will provide a one-off Medisave top-up to all Singaporeans currently on MediShield;

• A Government guarantee will be provided on the debt instruments issued by the specialised Project Finance company for financing in larger, long term projects overseas;

• Process of Foreign Worker Levies (“FWL”) increases will be fully phased in for every sector by July 2013 and wef 1 July 2012, Dependency Ratio Ceilings (“DRCs”) for foreign workers will be decreased by 5% for all sectors;

• SME who upgrade their worker through allowable courses will receive a 90% course subsidy. Similar training benefits are also given to self-employed persons;

• Productivity Improvement Project (“PIP”) Scheme grant for SME is increased to 70%;

• Excise duties will be raised by 10% to 20% for selected tobacco products;

• Stamp duty relief will be extended to M&A deals completed from 17 February 2012 to 31 March 2015; and

• GST vouchers will be given to lower-income families via cash, utilities save rebates and CPF Medisave top-ups for older Singaporeans to fully offset the 7% GST that households pay on their expenses.


The above summary was prepared for your quick reference and should you require more details on the above, please contacts us.

17 February 2012





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