Late payment interest rate in commercial transactions drops to 10.15%

The interest rate applicable for late payments in commercial transactions has been reduced to 10.15 per cent, effective from 1st July 2025.

This marks a notable decline from the 11.15 per cent rate set on 1st January 2025, continuing the downward trend from the highs recorded in previous years. The reduction follows the European Central Bank’s (ECB) decision to lower its reference rate.

The Malta Association of Credit Management (MACM), a non-profit organisation promoting and protecting the credit interests of Maltese businesses, notified its members of the update.

As per a European Directive transposed into Maltese law in 2012, suppliers of goods and services are entitled to charge interest on late payments equivalent to eight per cent (unchanged since the law’s introduction), plus the ECB reference rate.

The applicable interest rate on late payments comes into force the day after the agreed payment term lapses.

When payment terms are not specified in the contract of sale, suppliers (creditors) are entitled to charge interest after 30 calendar days from the date of receipt of goods or services, or from the date of invoice. Interest accrues on a daily basis.

In comments previously given to BusinessNow.mt, MACM Director General Josef Busuttil noted that the interest rate for late payments in business-to-business transactions is revised twice annually, 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 period for payment agreed by the parties in the contract of sale may not exceed 60 calendar days. However, the parties may expressly agree for a longer period as long as the extension of time is not grossly unfair to the supplier of goods and services (creditor).
• The supplier of goods and services (creditor) may proceed with the claim for late payment against the client (debtor) without reminding the client (debtor) that the amount is due.
• In the case of transactions between undertakings and public authorities, the period for payment shall be 30 calendar days if not expressly agreed in the contract and may not exceed 60 calendar days if fixed in the contract.
• However, in case the client (debtor) is a public authority which carries out economic activities of an industrial or commercial nature and if the public authority provides health care, and the payment period is not expressly fixed in the contract, the payment period shall not exceed 60 calendar days.
• Agreement between the supplier of goods and services (creditor) and client (debtor) to extend the date of receipt of invoice is null and void.
• In addition to the interest charges on late payment, the supplier of goods and services (creditor) is entitled to reasonable compensation for the supplier’s own recovery costs at a minimum of €40.
• When the contract of sale provides for the retention of title between the seller and the buyer, the seller is entitled to retain title over the goods until the price has been paid in full by the buyer.

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.