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Increase in Interest rates for late commercial payments
05 January 2024
As of January 1, 2024, the interest rate for late payments in commercial transactions in Malta has increased to 12.5%, previously being at 12%. This adjustment is made on January 1 and July 1 each year.
The Late payments directive was implemented in 2012, addressing late payments in commercial transactions. Under this directive, creditors have the right to charge interest on late payments at a rate of 8% plus the European Central Bank reference rate. This interest is calculated from the day following the agreed payment date or contract-end date.
When payment terms are unspecified, the creditor can claim interest 30 calendar days from the receipt of goods or services, or from the invoice date. The agreed payment period in the contract cannot exceed 60 calendar days, unless both parties expressly agree on a longer period that is not grossly unfair to the creditor.
Creditors can pursue late payment claims without reminding debtors, especially in transactions between undertakings and public authorities. In such cases, the payment period is 30 days unless otherwise agreed, with a maximum of 60 days if specified in the contract.
Conditions for interest on late payments in commercial transactions also include:
- Payment period limited to 60 calendar days, unless mutually agreed upon for fairness.
- Supplier can claim late payment without a reminder.
- Business-public authority transactions have a 30-day default payment period, not exceeding 60 days if specified.
- Public authorities engaging in economic activities have a 60-day payment limit if unspecified.
- Any extension of the invoice receipt date is void.
- Supplier entitled to a minimum €40 compensation in addition to interest charges.
- Retention of title in contracts until the buyer pays in full.
The Late payments directive is currently being revised in order to ensure more proportionality adding more safeguards to clauses already included. This is to ensure SMEs are safeguarded.
If you would like to know more about this directive, please do not hesitate to get in touch.
