The interest rate in the event of late payment in commercial transactions has increased to 12 per cent as from 1st July 2023.
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.
The increase – from 10.5 per cent in the first fix months of the year to 12 per cent as from the beginning of July – comes after the European Central Bank (ECB) increased its reference rate.
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 – which has gone from 2.5 per cent to four per cent this month.
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.
Speaking to WhosWho.mt, MACM Director General Josef Busuttil explains 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 says. “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 says that the interest rate was always meant to be a deterrent by providing suppliers with a legal mechanism to take timely action.
“If a business doesn’t pay a bill for €1,000 on time, it now owes €1,120.”
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.
The forum was chaired by Chief Officer of Financial Stability and Statistics Alan Cassar
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