Deduction of social security contributions by self-employed taxpayers
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Self-employed taxpayers in Luxembourg, whether resident or non-resident, must be enrolled with the Luxembourg social security system (subject to applicable rules when combined with other work outside of Luxembourg). Contributions to the Luxembourg social security system are tax deductible as special expenses. The only exception to this rule are long-term care insurance contributions.
In theory, ontributions to foreign mandatory social security systems are also tax-deductible.
Who is concerned
This section applies to:
- all resident individuals who are self-employed workers in Luxembourg or abroad, and who file an income tax return;
- all non-resident individuals who are self-employed workers in Luxembourg, and who file an income tax return;
- all non-resident individuals who are self-employed workers in Luxembourg or abroad, and who opt to be treated as Luxembourg tax residents and who therefore file a tax return.
How to proceed
Deductible contributions
The following contributions are tax deductible as special expenses:
- legally required contributions paid by self-employed workers to a Luxembourg social security organisation for the purpose of health insurance, pension insurance or accident insurance;
- legally required contributions paid by self-employed workers to a foreign social security organisation governed by a bilateral or multilateral social security instrument;
- personal contributions for ongoing, voluntary or optional insurance, and for the purchase of health and pension insurance contribution periods, paid to a legal Luxembourg or foreign social security scheme governed by a bilateral or multilateral social security instrument;
- voluntary contributions by a self-employed taxpayer to the Employers' Mutual Insurance (Mutualité des employeurs - MDE), including health insurance contributions for members of the taxpayer's family.
For tax year 2010, any cash benefits received by the taxpayer from the Employers' Mutual Insurance must be deducted from their social security contributions.
Example:
In 2010, a self-employed taxpayer paid EUR 1,000 in voluntary contributions to the Employer's Mutual Insurance scheme. In the same year, the taxpayer received EUR 450 in cash benefits from the Employer's Mutual Insurance scheme. For tax year 2010, the taxpayer may deduct EUR 550 (1,000 - 450) for special expenses.
For the 2011 and subsequent tax years, the financial compensation received from the Employers' Mutual Insurance scheme is considered as taxable replacement income and subject to social security contributions.
In addition, with respect to volunteer firefighters (CGDIS), the partial repayment of contributions made under an individual old-age pension contract, or under a health insurance contract and deducted as special expenses in a taxation year preceding that of the repayment will, for the purpose of determining the deductible amount of special expenses, be deducted from payments made under the contracts mentioned above in the year of repayment.
Legally required contributions
Resident or non-resident taxpayers who are self-employed workers in Luxembourg or abroad may deduct their contributions to Luxembourg or foreign mandatory social security schemes on the tax return form (form 100).
The amount of these contributions is entered either in the field relating to non-exempt income that is therefore taxable in Luxembourg, or in the field relating to exempt income that is therefore not taxable in Luxembourg.
Voluntary or optional contributions
Resident or non-resident taxpayers who are self-employed workers in Luxembourg or abroad may deduct their voluntary or optional contributions to Luxembourg or foreign social security schemes on the tax return form (form 100).
Online services and forms
Related procedures and links
Procedures
Links
Legal references
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Loi modifiée du 4 décembre 1967
concernant l'impôt sur le revenu
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Circulaire LIR n°110/1 du 16 novembre 2010
Mutualité des employeurs
