The legislator encourages you to take out a private pension scheme contract by offering tax benefits, subject to certain regulatory constraints that include the following, in particular:
- you must be an individual taxpayer resident in Luxembourg, or equivalent,
- you must be under 65 years old,
- you must take out a policy for a minimum term of 10 years,
- the minimum age at which you may redeem the policy is 60 years and the maximum is 75 years of age,
- the maximum annual amount deductible per individual taxpayer: EUR 3.200.
When the policy matures, you can choose between:
- a lump-sum payment of all the capital accumulated,
- payment in the form of a lump sum for up to 50% of the capital accumulated and the remainder in the form of a monthly annuity,
- payment of all the capital accumulated in the form of an annuity.
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● Repayment in the form of a lump sum is taxed at half the total rate, as the total rate is your average tax rate.
● Half of your monthly annuity is exempt from taxation.