The applicable interest rates on overdue payments in business transactions due in terms of the late payments directive (Directive 2011/17 on combating late payments), has been raised to 12.5% per annum. This rate combines the statutory 8% per annum, as established by the late payments directive (Directive 2011/17 on combating late payments), with the reference rate set by the European Central Bank which is a rate determined biannually, and which currently stands at 4.5% per annum.
The late payments directive has applied to payments made as remuneration for commercial transactions carried out between private and public undertakings, between undertakings and public authorities, and between main contractors and their suppliers and subcontractors, since the 1st of March, 2012. Following the adoption of this EU Directive in 2012, creditors were provided with the legal basis to charge 8% plus the ECB reference rate as interest on late payments, starting from the agreed payment date in the contract. It is also relevant to note that this Directive is currently under revision and is expected to transition to a regulation, which will become directly applicable in all EU Member States without the need of any transposition, augmenting uniformity of its application within the European Union.
As it currently stands, unspecified payment terms in commercial contracts entitle the creditor with the right to charge interest 30 days following the date of the invoice or the receipt of the goods or services. The contractual payment period should not exceed sixty (60) days, although this period may be extended under fair conditions contractually, depending on the nature of the agreement. In transactions with public authorities, payment defaults to thirty (30) days and can reach sixty (60) days where this has been clearly stipulated contractually. In addition to the interest charges on late payment, the supplier is entitled to reasonable compensation for the supplier's own recovery costs at a minimum of €40.
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