Interest on late commercial payments increases to 12.5%

The interest rate for late payments in commercial transactions has increased to 12.5%, the Malta Association of Credit Management announced on Thursday.

This rate is recalculated biannually on January 1 and July 1, combining the statutory 8% with the reference rate set by the European Central Bank.

Up until 2022, the interest rate stood at 8%, aligning with the ECB reference rate of 0%. However, with subsequent hikes in interest rates, the rate for late payments escalated to 10.5% in January 2023 and a further 12% in July the same year. It now stands at 12.5%.

Malta implemented the EU directive on combating late payments in commercial transactions in 2012. The MACM clarified that suppliers (creditors) have the right to impose interest on late payments, amounting to 8% plus the ECB reference rate, starting from the day following the agreed payment date in the sales contract.

When the payment terms are unspecified in the contract, the supplier (creditor) is entitled to interest on late payment after 30 calendar days from the receipt of goods or services or 30 days from the invoice date.

The contractual payment period between parties may not exceed 60 calendar days. Nevertheless, an extension may be agreed upon, provided it is not unfairly disadvantageous to the supplier (creditor).

The supplier (creditor) can pursue a claim for late payment against the client (debtor) without issuing a reminder about the outstanding amount.

In transactions between businesses and public authorities, the payment period defaults to 30 calendar days if not expressly defined in the contract, with a maximum of 60 calendar days if specified.

However, for public authorities engaged in economic or commercial activities, particularly those offering healthcare, the payment period cannot exceed 60 calendar days when not explicitly mentioned in the contract.

The MACM, a non-profit organisation, serves as a central national entity for the advocacy and safeguarding of credit interests related to Maltese businesses.