Payment deadlines and interest for late payments
Unfortunately, companies can sometimes struggle to collect receivables from their sales or services.
Can they charge late payment penalties or interest penalties when payment is overdue?
The situation is different depending on whether the receivable comes from a professional transaction (business, administration…) or a private consumer.
Receivables resulting from a transaction with a business or public administration
In this situation, late interest starts accruing automatically and with no need of formalities on the first day past the agreed payment deadline.
There is no need of formalities with payment reminders or formal notices to accrue interest or demand reimbursement of collection expenses.
If there is no explicit payment deadline on the invoice or contract, the payment date is fixed 30 days after the date following the reception of the invoice or goods.
The interest rate applicable is published at the beginning of each semester at the Mémorial A. It is the base ECB rate plus 8%. For the second semester of 2019, the interest rate was 8% (since the ECB base rate was 0%).
In practice, in order to ease the use of late interest payment and reimbursement of collection expenses, it is advised to add on invoices the following sentence “according to legal provisions of the law of April 18th 2004 on payment delays and late interest payments in particular, invoices not settled at due day will bear interest of the BCE base rate plus 8% and will give rise to collection fees”. Such a mention remains optional.
Receivables on a private consumer
Rules regarding interest on late payments with a private consumer are radically different and presented below.
Firstly, interest starts running only three months after the reception of the goods, the completion of constructions or services.
Secondly, in order to charge interest, the professional must prove that he addressed the invoice to the consumer in the month following the date of the reception of the goods and the completion of construction or services.
Finally, the invoice must contain the mention “according to legal provisions of the law of April 18th 2004 on payment delays and late interest payments in particular, invoices not settled at due day will bear interest set by grand-ducal regulation”.
The interest rate applicable is set every year by grand-ducal regulation. The rate is 2% for 2020. It was 2% in 2019 and 2.25% in 2017 and 2018.
Reference : law of April 18th 2004 on payment delays and late interest payments as modified by the law of March 29th 2013