The interest rate in the event of late payment in commercial transactions has increased to 12.5 per cent as from 1st January 2024.
This marks a further increase of 0.5 per cent over the 12 per cent rate set on 1st July, itself an increase over the 10.5 per cent rate set 12 months ago.
The increase comes after the European Central Bank (ECB) increased its reference rate.
The Malta Association of Credit Management (MACM), a non-profit organisation for the promotion and protection of all credit interest pertaining to Maltese businesses, has warned local enterprises that late business-to-business (B2B) payments are now subject to a higher rate of interest.
As per a European Directive that was transposed in Maltese law in 2012, suppliers of goods and services have the right to charge interest on late payment equivalent to eight per cent (a rate that is unchanged since the introduction of the law) plus the ECB reference rate.
The applicable late payment interest rate applies from the day following the end of the term agreed in the contract of sale.
When the payment terms are not specified in the contract of sale, the supplier of goods and services (the creditor) is entitled to interest on late payment following 30 calendar days from the date of receipt of goods or services, or 30 days from the date of invoice.
Interest accrues daily.
In comments made to BusinessNow.mt last year, MACM Director General Josef Busuttil explained that the interest rate for late payments in B2B transactions is updated twice every year, in January and July.
“Late payment remain a big problem in Europe, and in Malta no less so,” he said. “Late payments are wasted, idle money that cannot be used, costing the receiving company timely cash flow and preventing it from investing it, paying wages, or other productive uses.”
Mr Busuttil said that the interest rate was always meant to be a deterrent by providing suppliers with a legal mechanism to take timely action.
He added that all a business needs to do to make use of the mechanism is to send an updated invoice.
Other conditions relating to the interest chargeable for late payment in commercial transactions are:
The MACM, which is a member of the Federation of European Credit Management Associations (FECMA), also reminded Maltese businesses that it can provide Know Your Customer (KYC), due diligence and international credit rating reports.
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