INTEREST ON LATE PAYMENTS FOR COMMERCIAL TRANSACTIONS
In the Law of April 18, 2004, Luxembourg transposes the European directive regarding actions against late payments for commercial transactions, laying out a clear and simple system for dealing with this issue.
The scope is limited to commercial transactions, that is, the act of supplying merchandise or services between businesses and public authorities or B2B.
The rules regarding transactions between businesses and end consumers are unchanged from the laws of June 23, 1909 and February 22, 1984 (see below).
Interest on late payments can be requested by right, automatically and without formal notice from the day following the date payment is due or 30 days after the receipt of the bill or the receipt of merchandise. It is nevertheless possible to set a different payment scheme by contract.
The rate of interest on late payments is set by law and published quarterly in the Memorial A. It is equal to the key ECB interest rate plus 7%. In the first quarter of 2009, this rate was 9.5%, and in the second quarter of 2008 it was 11.07%.
In addition to interest for late payments, it is also possible to obtain reimbursement for recovery costs through legal recourse.
In practice, we advise our clients to include a simple sentence in their billing indicating "In conformance with Luxembourg's law of April 18, 2004, a failure to settle accounts on time carries a rate of interest equal to the key ECB interest rate plus 7%."
In terms of business/consumer relations, the law summarizes prior legislation on this matter.
The main differences with the law on commercial transactions are :
- the normal payment deadline is 90 days (from the date of receipt of merchandise, work completion or date of services rendered).
- the rate of interest on a delayed payment is set for the calendar year by Luxembourg decree. The rate was 4.25% in 2009 and 5.75% in 2008.
A bill must be issued within 30 days and must contain a specific mention that the business intends to benefit from article 12 of the law of April 18, 2004.