20 %
of net income, deductible every year
A self-employed worker in Luxembourg can pay contributions into an approved supplementary pension scheme, deduct them in full up to that ceiling, and see them taxed at a flat 20.9% instead of a marginal rate that can reach 45.78%.
📌 The RCPi in two lines
Since 1 January 2019 (law of 1 August 2018), self-employed workers have had access to a tool that used to be reserved for employees: the supplementary pension scheme (RCPi). Contributions are deductible as special expenses under Article 110, no. 3a of the Income Tax Law (LIR).
The point of this article is not the principle — it is the arithmetic. Below, what the scheme is actually worth, in euros.
👥 Who is eligible
Traders and craftsmen
Personally affiliated as compulsory insured to a Luxembourg or foreign social security scheme.
Liberal professions
Doctors, lawyers, architects, consultants, and any activity covered by Art. 91(1)2 LIR.
Managing partners of a SARL
Holding more than 25% of the shares and carrying the business permit; only the day-to-day management remuneration counts.
Directors of a SA
For the day-to-day management remuneration, and for directors' fees when personally affiliated for them.
⚠️ Two traps — a SARL partner who is not a manager usually earns neither Art. 10 LIR income nor Art. 95(6) LIR income: his deductible limit is zero. And a non-resident can only deduct if he obtains tax assimilation to a resident under Art. 157ter LIR.
🧮 The ceiling: 20% of net income
The deductible limit equals 20% of the sum of net income under Art. 10, nos. 1 to 3 LIR for which you are personally affiliated as a compulsory insured, plus day-to-day management remuneration (Art. 95(6) LIR) that has not already been used to fund a company pension scheme. Income exempted in Luxembourg under a double tax treaty does not count.
💡 To remember — the ceiling is annual and cannot be carried forward. Contribute less than 20% in a given year and the unused headroom is lost for good. Hence the value of estimating your net income before 31 December, not in April.
💵 The real cost: 20.9%
Contributions are not tax-free: the insurer withholds a flat tax on your behalf. That is precisely what makes the scheme attractive — the flat rate replaces your marginal rate.
| Levy |
Rate |
Legal basis |
| Flat withholding tax | 20 % | Art. 152 LIR — withheld by the insurer, final (liberatory) |
| Remuneration tax | 0.9% | Grand-ducal regulation of 22 December 2006 — not deductible |
| Total effective cost | 20.9% | What the contribution actually costs you in tax |
| Marginal rate avoided | up to 45.78% | 42% top bracket + 9% employment fund contribution |
💡 The break-even — the scheme only creates value if your marginal tax rate exceeds 20.9%. Below that, it costs you money.
📊 A worked example
Take a single self-employed professional (tax class 1) with €100,000 of net professional income, whose marginal rate sits at 41.73% (39% plus the 7% employment fund contribution). The maximum deductible contribution is €20,000.
| €20,000 allocated |
With the RCPi |
Without the RCPi |
| Tax treatment | Deducted as a special expense | Stays in the taxable base |
| Rate applied | 20.9% flat | 41.73% marginal |
| Tax paid | €4,180 | €8,346 |
| Amount left over | €15,820 invested in the contract | €11,654 in your pocket |
| Immediate gain | + €4,166 | — |
That is €4,166 more working inside the contract, every single year — and compounding. And at retirement, the capital paid out by the insurer is no longer subject to income tax in Luxembourg: only the dependency contribution (currently 1.4%) is withheld on the benefit.
⚠️ Figures are illustrative. Your actual saving depends on your tax class, your other special expenses and your effective marginal rate — it has to be computed on your own file.
⚠️ What to watch out for
LEVEL 1The ceiling evaporates
Unused headroom in year N cannot be topped up in year N+1. Under-contributing is a permanent loss, not a deferral.
LEVEL 2The capital is locked
Before retirement age, contributions can only be repaid if the amounts paid in are below three times the monthly minimum social wage, or if you lose your affiliation and are no longer covered by Luxembourg health insurance.
LEVEL 3No benefit at all in two cases
If your marginal rate is at or below 20.9%, the flat levy costs more than it saves. And a non-resident who does not meet the Art. 157ter LIR assimilation conditions simply cannot deduct anything.
🛠 How to set it up
1
Estimate your net income for the current year — the whole optimisation rests on this figure, so it has to be produced before year-end, from up-to-date bookkeeping.
2
Compute the ceiling — 20% of that net income, restricted to the income for which you are personally affiliated and taxable in Luxembourg.
3
Subscribe to an approved scheme — with the insurer of your choice, under the amended law of 8 June 1999 on supplementary pension schemes.
4
Pay before 31 December — the insurer withholds the 20% flat tax and the 0.9% remuneration tax, and invests the balance.
5
Claim the deduction — keep the insurer's certificate and report the contribution as a special expense in your income tax return (Form 100).
🎯 Why Galux
20 %
the ceiling we recompute for you every year
31/12
the deadline we track, before it is too late
100 %
of the paperwork handled, from certificate to Form 100
The RCPi is only as good as the figure it is built on. Our job is to close your year early enough to give you a reliable net income estimate, size the contribution to the euro, and carry the deduction all the way into your tax return.
How much would the RCPi save you this year?
We compute your ceiling and your saving on your own figures.
Talk to us →