The new supplementary pension scheme with tax advantages
Voted by the Luxembourg Chamber of Deputies on 5 July 2018, the draft law 7119 on supplementary pension schemes (known as "law RCP") endorsed the possibility offered to self-employed, independant workers and liberal professionnals to benefit from a complementary pension in a tax-advantageous way. Thus, under the new law:
- Liberal professions such as lawyers, architects, doctors, dentists, vets but also accountants or consultants, among others...
- Small business leader
Will be eligible to this new supplementary pension scheme. The effective date is set on January 1st, 2019 : get yourself ready in order to benefit from all the possibilities.
Supplementary Pension Scheme for Independents and Liberal Professions, what are we talking about?
Different types of risk covers can be considered : An available capital at the time of retirement, a disability pension, a capital in case of death... all these benefits can be included into your Supplementary Pension Scheme.
How advantageous is the tax regime ?
The new law has introduced a favorable tax regime. Premiums paid into a self-employed supplementary pension plan are deductible as a "special expenses". Amounts are deductible up to 20% of annual incomes, with no ceiling, and come to reduce the taxable income.
Because a flat rate of 20% withholding tax plus a 0.9% charge are applied on the premiums when they are payed, there is no tax whatsoever on the benefits when assets are finally used at retirement age.
And how are the premium being invested?
Self-employed, liberal professionnals and independant workers are able to choose their premium amount in avery flexible manner : they can adapt the payments at each and every moment of the year.
In terms of investments types, they can choose for a classical investment vehicle with a guaranteed interest rate or decide for a unit-linked life insurance which whose performance depends on financial markets. A third possibility consists in blending the two options.
Only your personal risk profile, investment horizon and retirement anticipation will guide the choice.
Quelle fiscalité pour le RCPI ?
Tax advantages at a glance :
- Premiums are tax deductibles as "Special Expenses".
- Maximum deductible amount is up to 20% of net yearly income.
- Withholding tax of 20% + 0,9% on the paid premiums.
- A tax-free retirement benefits in Luxembourg.