The entire European economy is negatively affected by late payment. To protect European businesses, particularly SMEs, against late payment, the EU adopted Directive 2011/7/EU on combating late payment in commercial transactions in February 2011.
Each year across Europe thousands of small and medium-sized enterprises (SMEs) go bankrupt waiting for their invoices to be paid. Jobs are lost and entrepreneurship is stifled. Late payment causes administrative and financial burdens, which are particularly acute when businesses and customers are in different EU countries. Cross-border trade is inevitably impacted.
For Europe’s valued SMEs, any disruption to cash flow can mean the difference between solvency and bankruptcy. The economic crisis presented numerous difficulties, but for SMEs the challenges presented by late payment have grown disproportionately as credit lines and bank loans become less available.
To protect European businesses, in particular SMEs, against late payment and to improve their competitiveness, Directive 2011/7/EU on combating late payment in commercial transactions was adopted on 16 February 2011 and was due to be integrated into national law by EU countries by 16 March 2013 at the latest. This directive puts in place strict measures which, when properly implemented by EU countries, will contribute significantly to employment, growth and an improvement in the liquidity of businesses.
Revision of the directive
The Commission is working on a revision of the Late Payment Directive and launched a call for evidence, a public consultation and an SME panel (targeting SMEs) to collect feedback. The contributions received for the call for evidence and the report on the results of the public consultation are published below. The results of the SME panel will be published with the impact assessment accompanying the revision proposal.
Main provisions of the directive
- public authorities have to pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days
- enterprises have to pay their invoices within 60 days, unless they expressly agree otherwise and provided it is not grossly unfair
- automatic entitlement to interest for late payment and €40 minimum as compensation for recovery costs
- statutory interest of at least 8% above the European Central Bank’s reference rate
- EU countries may continue maintaining or bringing into force laws and regulations which are more favourable to the creditor than the provisions of the directive
Interest for late payment and calculator
See statutory interest rates (percentage per year) in all EU countries and a late payment interest calculator on the Your Europe Business portal.
Implementation of the directive into EU country law
Summary of national legislation
EU Observatory of payments in commercial transactions
As announced in the SME Strategy, an EU Observatory of payments in commercial transactions will support the enforcement of the Late Payment Directive. The Observatory will be a single access point for collecting information and data about the payment behaviour of public authorities and businesses in their commercial transactions with other businesses. It will collect data from available sources at EU, national, and sector levels.
Pilot work is already proceeding in the construction sector. As part of this, the European Construction Sector Observatory published two analytical reports. One on late payments in construction and the other on late payment indicators in construction.
Efforts to expand the Observatory to other sectors and set up a website are ongoing. We expect completion in 2023.
An SME panel consultation on late payments was launched from August to October 2021 with the support of the Enterprise Europe Network SME feedback correspondents. This consultation aimed to gather feedback from the Enterprise Europe Network’s SME clients across the EU on payment conditions that SMEs currently face, the issues they encounter with late payments, dispute settlement, and possible policy solutions for combatting late payment issues. The results of this consultation are now available.
- Report on the SME panel consultation
- Governments` Late Payments and Firms` Survival: Evidence from the European Union (JRC study)
- European Parliament Resolution on the implementation of the Late Payment Directive
- Opinion of the Fit for Future Platform on the Late Payment Directive
- Building a responsible payment culture – improving the effectiveness of the Late Payment Directive (Commission Study)
- Final report on assessing the economic impact of faster payments in B2B commercial transactions (JRC Study)
Report on the implementation of the Late Payment Directive
On 26 August 2016, the Commission adopted a report accompanied by a staff working document on the implementation of the directive. The report, which has been submitted to the European Parliament and to the Council, took into account the results of a study on the ex-post evaluation of the Directive as well as further research. The report assesses the effectiveness, efficiency, coherence, relevance and EU added value of the directive. It also puts forward recommendations for the Commission and the EU countries, which should fully exploit the benefits of the directive. The report is based on the ex-post evaluation study of the Directive carried out in 2015.
Late payment in business-to-business (B2B) transactions
One of the recommendations from the directive's implementation report was to identify best practices for more effective application of the directive in the EU countries. To follow this recommendation, the Commission launched a study focusing on commercial transactions between enterprises (B2B).
Evidence continues to show that in commercial relations, businesses, and especially SMEs, are reluctant to exercise these rights out of fear of damaging commercial relationships. This applies in particular to claiming interest and compensations when they receive payments late or accepting long payment terms.
In response to this, some EU countries have implemented sets of measures supporting the national laws that transposed the directive. These measures can be broadly categorised as
- structural/ legal measures in the form of 'hard' law
- voluntary/ 'soft' measures
This study mapped all these measures across all of the EU countries. It extrapolated a set of recommendations. These indicate whether the directive's relevant provisions are still fit for purpose and what could be done to build a stronger 'prompt payment' culture in the business environment.
See the infographic summarising results of the study.
See the 'related publications' for an executive summary in German and French, together with a comprehensive list of the literature used for the study.
Frequently asked questions
Frequently asked questions about the Late Payment Directive (167 KB)