SOCIAL SECURITY CONTRIBUTIONS IN THE GRAND DUCHY OF LUXEMBOURG
After covering exclusively tax-related topics in our previous newsletters (the SOPARFI regime, the new tax opportunities linked to the holding of real estate in France by a Luxembourg company, the Holdings 29 regime, the new VAT rules applicable to the issuing of invoices, etc.), we decided to tackle the issue of social security contributions for this edition in order to highlight the remarkable competitiveness and the advantages of the Grand Duchy of Luxembourg in this area, as well as the affiliation rules contained in European texts.
A- Rates of social contributions in force in the Grand Duchy of Luxembourg
The rates of contributions to the Centre Commun de la Sécurité Sociale du Grand Duchy of Luxembourg (Joint Social Security Centre of Luxembourg) are as follows:
Branch: Employees who perform work of a mainly intellectual nature*
Long-term care insurance
Employers' mutual insurance (variable rate)
Surcharge for cash compensation
(Source: Joint Social Security Centre)
* table updated as of 1 April 2022
** at the expense of the State for the private sector
*** variable from 0.675-1.125% depending on the company's bonus-malus factors
B- Who contributes to the Social Security of the Grand Duchy of Luxembourg?
With the possibilities of mobility offered to workers by the European treaties (freedom of movement, freedom of establishment, etc.), it was important for the legislator to provide the European Union with rules that would make it possible to determine which social security body would be applicable in the case of migrant workers, mobile workers or workers working simultaneously in several countries. This was the idea behind the adoption of European Regulation 883/2004 (and before it Regulation 1408/71), the aim of which is to lay down the rules for affiliation to the various social security bodies in the European Union.
Firstly, the Regulation lays down the principle of the uniqueness and exclusivity of the applicable Social Security Legislation: as a result, no worker in the European Union may in principle contribute to more than one Social Security system at the same time.
The cases in which European workers are attached to the Luxembourg social security system can be summarised as follows in the following three main cases:
- Employees who reside in the Grand Duchy of Luxembourg and who work at least 25% of their time on Luxembourg territory;
- Employees who reside outside the Grand Duchy of Luxembourg (in principle cross-border workers) and who do not spend more than 25% of their working time in the territory of the state in which they reside;
- Workers who simultaneously exercise an employed activity in the Grand Duchy of Luxembourg and a self-employed activity in other European Union countries.