Companies are required to apply late payment penalties to business customers who fail to pay their invoices on time. From the 1st half of 2023, the legal interest rate will be 2.06% for receivables due from businesses.
Late penalties provided for in the general terms and conditions of sale
As a general rule, the payment period between professionals is set at the 30th day following receipt of the goods or performance of the service. This period may be extended beyond 30 days, but may not exceed 60 days from the date of invoicing, if provided for in the contract.
In addition to payment by default, there are :
- Cash payment: the customer must pay for the goods or services on the day of delivery or performance.
- Payment on delivery: gives customers at least a week to receive the invoice for their purchase
- Negotiated payment terms: companies may stipulate a payment term of 60 days from invoice date in their special terms and conditions. This period may be extended to 45 days end of month from the date ofinvoice, provided this is specified in the contract.
Professionals who intentionally or unintentionally fail to define late payment penalties in their general terms and conditions of sale are liable to an administrative fine of up to 75,000 euros for an individual and 2 million euros for a legal entity. Failure to mention the rate of late payment penalties on an invoice may also result in an administrative fine of 75,000 euros for an individual and 375,000 euros for a company.
When specified in the CGV, the rate cannot be less than 3 times the legal rate, which stood at 0.77% in the second half of 2022.
Legal interest rate increases in 2023
The refinancing rate will change in 2023, as the European Central Bank has raised it by 10 points to 10% by December 31, 2022. Known as the "refi rate", it is applied when the company has not stipulated late payment penalties in its General Terms and Conditions of Sale. From January 1, 2023, this rate will rise to 12.50%, unless the ECB changes its refinancing rate.
As for the legal interest rate, which is used to calculate, in the absence of contractual stipulations, the late payment interest due by a customer in the event of non-payment following a formal notice, it will also increase. In the 1st half of 2023, it will reach 2.06% for receivables due from professionals, compared with 0.77% in the 2nd half of 2022.