A self-employed person is someone who carries out their professional activity in their own name. They may be a craftsperson, trader, farmer, or undertake an intellectual activity (accountant, architect, doctor, consultant, etc.).

How to start operating as a self-employed person?

To start your professional activity as a self-employed person it is not necessary to establish a company. However, it is necessary to join the joint social security centre. As a self-employed person, thanks to membership and contributions paid, you can enjoy different social benefits. You will be protected in case of maternity, incapacity for work and even receive family benefits, unemployment benefits and a pension. The joint social security centre takes care of affiliation with the national health fund. Finally, any change during activity must be declared directly to the joint social security centre.

How does the pension work in Luxembourg for the self-employed?

Self-employed workers are covered by the general pension insurance system. This system offers retirement benefits, meaning that it covers:

• old age pension: pension granted when retirement begins, granted in principle from the age of 65, provided that you have contributed for at least 120 months.
• disability pension: replacement benefit granted under certain conditions, to a person who cannot normally meet their needs.
• survivor’s pension: pension which can be paid to the surviving spouse or parents/children under certain conditions.

What is the pension fund for the self-employed?

Self-employed workers are therefore covered by the sabe institution as salaried workers –CNAP: the national pension insurance fund.

How does CNAP calculate the pension of a self-employed person?

The amount of a self-employed person’s pension is calculated in the same way as employee pensions. The amount is calculated based on the number of years contributed and contributory income. You can request a calculation of the pension amount from CNAP from the age of 55.

Baloise also offers a calculation simulator for the pension amount.

From when can you claim your pension as a self-employed person?

The legal retirement age has been set at 65 years, conditional upon having contributed for at least 10 years.

It is also possible to take “early retirement”:

• from 57 years, conditional upon having contributed for at least 40 years (compulsory insurance periods)
• from 60 years, conditional upon having contributed for at least 40 years (all periods combined, conditional upon having contributed for at least 10 years of compulsory periods).

Any request can be made to CNAP from the age of 55.

Finally, you can continue your self-employed professional activity while receiving your pension without exceeding certain thresholds.

This involves building supplementary capital to have available upon retirement, an income in case of incapacity for work or even a death benefit. This is to compensate for the legal pension, which will no longer be sufficient for maintaining living standards in retirement.

How to build a supplementary pension as a self-employed person?

The RCPI (self-employed supplementary pension system) is a new supplementary pension system implemented in Luxembourg in 2019.

It allows the self-employed, liberal professionals and managers of SMEs to build a supplementary pension in a supervised and advantageous way.

This system offers considerable tax advantages, in particular the deductibility of premiums paid as special expenses up to 20% of annual net income before tax.

Furthermore, a flat rate tax of 20% is applied on the premiums, offering tax exemption on benefits paid subsequently. 

What are the tax advantages of the RCPI?

The RCPI for the self-employed therefore offers numerous tax advantages:

• Premiums which are tax deductible as special expenses.
• A maximum deductible equal to 20% of your annual net income.
• The withholding of a flat rate tax of 20% and a remuneration tax of 0.9% on the premiums paid.
• A retirement benefit net of tax in Luxembourg. 

In order to benefit from this advantageous tax system, the self-employed person must be established in Luxembourg; that is, residing, undertaking their activity and making their tax declaration there.

Example tax deduction for subscribing to a payment in an RCPI: