Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on combating late payment in commercial transactions
Date: 2023-09-12
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: commercial transaction, contract terms, deadline for payment, goods and services, single market, small and medium-sized enterprises

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 12.9.2023  COM(2023) 533 final/2 2023/0323 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on combating late payment in commercial transactions (Text with EEA relevance) {SEC(2023) 313 final} - {SWD(2023) 312 final} - {SWD(2023) 313 final} - {SWD(2023) 314 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

• 
Every  year,  around  18  billion  invoices  are  issued  in  the  EU,  more  than  500  every  second1. 
Reliable payment streams are necessary to make the EU economy, and especially small and 
medium-sized enterprises (SMEs), more competitive.  

Goods and services are often supplied on deferred payments: the supplier (the creditor) grants 
the  client  (the  debtor)  a  payment  term  to  pay  the  invoice  (trade  credit),  after  the  goods  are 
delivered or the service agreed on in the contract is provided. Late payments are payments not 
made within the agreed or legal term. They affect companies in all sectors2 and all Member 
States3 and, to a disproportionate degree, severely affect SMEs4.  

The  root  cause  of  late  payments  is  asymmetries  in  bargaining  power  between  a  large  client 
(debtor) and a smaller supplier (creditor). This often results in the supplier’s having to accept 
unfair payment terms and conditions. For debtors, paying late is an attractive form of finance 
that costs the debtor nothing but does have a cost for the creditor. This is compounded by the 
inadequacy  of  the  current  EU  legal  framework,  Directive  2011/7/EU  (the  Late  Payment 
Directive),  which  lacks  sufficient  preventive  measures  and  suitable  deterrents,  and  whose 
enforcement and redress mechanisms are insufficient5.  

The revision  of the Late Payment Directive  addresses these shortcomings,  with  the ultimate 
aims  of  improving  the  payment  discipline  of  all  concerned  actors  (public  authorities,  large 
companies and SMEs) and protecting companies from the negative effects of payment delays 
in commercial transactions.  

The revision of the Late Payment Directive has been included in the Commission 2023 work 
programme under the objective ‘A Europe fit for the Digital Age’.  

• 

Consistency with existing policy provisions in the policy area 

Improving  payment  behaviour  in  commercial  transactions  is  one  of  the  objectives  of  the 
Commission  Communications  Updating  the  2020  New  Industrial  Strategy6  and  an  SME 
Strategy  for  a  sustainable  and  digital  Europe7.  The  revision  also  follows  up  on  the 
recommendations issued by the Fit for Future Platform in the Opinion adopted in December 
20218 and the Resolution of the European Parliament of 20199. This initiative also contributes 
to  the  objectives  of  the  Communication  “Long-term  competitiveness  of  the  EU:  looking 

1 

2 
3 
4 

5 
6 
7 
8 
9 

European  Commission  (2019).  Study  on  the  evaluation  of  invoicing  rules  of  Directive  2006/112/EC. 
Final Report. 
European Payment Report 2022. 
European Payment Report 2022. 
T., Nicolas, Short-term financial constraints and SMEs’ investment decision: evidence from the working 
capital channel, Small Business Economics (2021). 
Final opinion 2021_SBGR2_06 Late payments_fup_0.pdf (europa.eu) 
COM (2021) 350 final. 
COM (2020) 103 final. 
Final opinion 2021_SBGR2_06 Late payments_fup_0.pdf (europa.eu) 
https://www.europarl.europa.eu/doceo/document/TA-8-2019-0042_EN.html 

EN 

1 

  EN 

 
 
beyond  2030”10.  This  revision  in  fact  aims  to  bring  fairness  in  commercial  transactions, 
increase  the  resilience  of  SMEs  and  supply  chains,  foster  a  more  widespread  use  of 
digitalisation and improve financial literacy of entrepreneurs. The Late Payment Directive is 
part of the REFIT Scoreboard11. 

• 

Consistency with other Union policies 

The  Late  Payment  Directive  is  closely  linked  to  the  Directive  on  unfair  trading  practices  in 
business to business (B2B) relationships in the agricultural and food supply chain  (the UTP 
Directive). The legal relationship between the two texts is explained in recitals 17 and 18 and 
Article 3(1) of the UTP Directive. The UTP Directive does not impinge on the rules, remedies 
and consequences laid down in the Late Payment Directive. Nor do the provisions of the Late 
Payment  Directive  impinge  on  the  rules  applicable  in  the  agri-food  sector  to  value-sharing 
agreements, payments in the context of the school scheme, or certain payments in the sale of 
grapes, must and wine in bulk in the wine sector.  

The  Late  Payment  Directive  regulates  payments  in  commercial  transactions  between 
contracting authorities and main contractors and between contractors and their subcontractors. 
Article 71 (3) of Directive 2014/24/EU and Article 88(7) of Directive 2014/25/EU on public 
procurement  provide  for  the  possibility  for  the  Member  States  to  lay  down  provisions  on 
direct payments to subcontractors. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 114 of the Treaty on the Functioning of the European Union (TFEU) is the appropriate 
legal  basis  for  this  initiative  to  achieve  its  objectives.  Article  114  TFEU  is  the  appropriate 
legal  basis  for  measures  aimed  at  achieving  the  objectives  set  out  in  Article  26  TFEU 
(harmonising national provisions).  

EU  action  is  required  to  ensure  that  all  Member  States  have  the  minimum  rules  in  place  to 
prevent  late  payments,  have  the  right  enforcement  and  deterrent  measures  to  combat  late 
payments  in  place,  and  have  adequate  means  of  redress.  In  this  context,  the  targeted  EU 
intervention by means of this proposal is in line with the principle of subsidiarity.  

The current Late Payment Directive is a recast of the first Late Payment Directive (Directive 
2000/35/EC),  based  on  Article  95  of  the  Treaty  Establishing  the  European  Community.  Its 
revision  is  therefore  within  the  joint  remit  (shared  competence)  of  the  EU  and  its  Member 
States’ governments. 

• 

Subsidiarity (for non-exclusive competence)  

Late  payment  affects  all  Member  States.  Facilitating  prompt  payment  requires  strict  and 
coordinated rules. Implementing 27 national solutions would likely result in a lack of uniform 
rules,  fragmentation  of  the  single  market  and  higher  costs  for  companies  trading  across 
borders.  EU  action  is  justified  because  late  payment  affects  all  commercial  transactions  in 
public procurement and between companies, regardless of their size. As a revision of existing 
EU legislation to strengthen its provisions, it can only be done at EU level.  

10 
11 

COM (2023) 168 final 
https://op.europa.eu/webpub/com/refit-scoreboard/en/policy/10/10-6.html 

EN 

2 

  EN 

 
 
EU action is required to set out provisions on interest and compensation fees, establish clearer 
payment terms  for B2B  transactions; set out enforcement and monitoring provisions, ensure 
that there are synergies in place with the public procurement framework. 

• 

Proportionality 

The  planned  initiative  will  not  go  beyond  what  is  necessary  to  achieve  its  objectives.  It 
imposes  on  companies  only  the  cost  necessary  to  achieve  those  objectives  and  serve  the 
immediate  needs  of  the  people  it  is  intended  for  (e.g.,  companies,  in  particular  SMEs)  to 
prevent late payment and bring about prompt payment. 

• 

Choice of the instrument 

The  instrument  chosen  is  a  Regulation,  to  replace  the  current  Late  Payment  Directive.  A 
Regulation  has  numerous  advantages,  including  tackling  the  cross-border  aspect  of  late 
payment.  With  a  Regulation,  key  aspects,  such  as  the  maximum  term  for  payments  and 
verification  procedures,  the  rate  of  interest  for  late  payments  and  the  amount  of  flat  fee 
compensation, will be the same throughout the EU and directly applicable. At the same time, 
Member  States  will  be  allowed  to  adopt  more  stringent  provisions  on  certain  aspects.  The 
Regulation  lays  down  obligations  regarding  enforcement  bodies,  mediation  systems,  credit 
management, financial literacy training and unfair contractual practices and provisions, but it 
would be for the Member States to complement them according to their national legislation. 
The new Regulation would also incorporate the provisions of the Late Payment Directive not 
affected by the revision. 

3. 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

• 
In  2015,  an  ex-post  evaluation  of  the  Late  Payment  Directive12  assessed  its  relevance, 
effectiveness, efficiency, coherence, and EU added value. It concluded that the Directive was 
relevant  and  efficient  and  did  not  impose  any  significant  costs  on  companies  or  public 
authorities. However, it also noted that fear of damaging commercial relations was stopping 
creditors  who  were  paid  late  from  asserting  the  rights  the  Directive  gives  them.  The  2021 
Opinion  of the  Fit for Future  Platform13  presented  10 recommendations  on  short- and long-
term  measures  to  address  late  payment.  The  short-term  measures  recommended  include 
defining what grossly unfair practices and clauses mean; looking into reversing the burden of 
proof  on  the  debtor  to  make  it  easier  for  creditors  to  prove  there  has  been  an  abuse; 
encouraging SMEs to assert their rights by providing advice and information about payment 
terms,  making  payment  terms  transparent,  and  self-regulation.  The  long-term  measures 
recommended  include  limiting  contractual  payment  terms  to  a  maximum  of  30  days  for 
payments from a large company to a SME, e-invoicing and governmental supervision. 

• 

Stakeholder consultations 

The  Commission  consulted  a  broad  range  of  stakeholders,  including  Member  State 
authorities,  companies,  in  particular  SMEs,  EU  and  national  business  associations,  private 
individuals and  academic  experts. The consultation activities included  a  call for evidence,  a 

12 

13 

https://publications.europa.eu/en/publication-detail/-/publication/400ecc74-9a54-11e5-b3b7-
01aa75ed71a1 
Final opinion 2021_SBGR2_06 Late payments_fup_0.pdf (europa.eu). 

EN 

3 

  EN 

 
 
public  consultation,  a  specific  consultation  of  SMEs  (SME  Panel),  bilateral  interviews  with 
key  stakeholders  and  discussions  with  representatives  of  Member  States.  The  information 
gained was used as input for the proposal.  

The  call  for  evidence  received  responses  from  137  stakeholders  and  the  public  consultation 
received  117  responses  between  12  January  and  17  March  202314.  The  SME  Panel15  took 
place between 26 January and 16 March 2023 and obtained 939 responses. 

The Commission organised bilateral meetings with key stakeholders representing companies, 
in particular SMEs16. Late payment was also discussed on 21 March and 31 May 2023 during 
meetings of the SME Envoys Network. Two meetings were held with the late payment expert 
group17 on 10 October 2022 and 13 January 2023. A large majority of stakeholders confirmed 
that late payments heavily affected companies, in particular SMEs.  

Almost  all  consulted  stakeholder  groups  expressed  their  support  for  revising  the  Directive. 
However,  some  stakeholders  pointed  out  that  stricter  rules  ran  counter  to  the  contractual 
freedom  of  European  companies.  Most  stakeholders  supported  the  option  of  capping  the 
payment  term  in  B2B  transactions,  with  a  preference  for  30  days.  Only  a  few  stakeholders 
were against the idea of  limiting payment terms. Many stakeholders supported the option to 
provide  training  on  credit  management  and  financial  literacy  and  to  establish  a  European 
Payment Observatory. It emerged from the consultation that interest on and compensation for 
late payments are rarely paid. Stakeholders were in favour of making the payment of interest 
automatic.  

• 

Collection and use of expertise  

In its collection and use of expertise, the Commission used the results of existing evaluations 
and reports: the Ex-post Evaluation of the Late Payment Directive18, the Commission Report 
to  the  European  Parliament  and  to  the  Council  on  the  implementation  of  the  Late  Payment 
Directive  (and  the  supporting  Staff  Working  Document)19,  the  European  Parliament 
Resolution on the implementation of the Late Payment Directive20 and the Opinion of the Fit 
for Future Platform on the Late Payment Directive21.  

The results of studies and surveys were also considered: the European Payment Reports22, the 
SME Performance Reviews reports23, the JRC studies on Late Payments and Firms24 and on 

14 

15 

16 
17 
18 

19 
20 
21 
22 
23 
24 

is 

here: 

feedback 

https://ec.europa.eu/info/law/better-regulation/have-your-

The 
available 
say/initiatives/13665-Late-payments-update-of-EU-rules_en.  
The  SME  Panel  enables  the  Commission  to  get  SMEs’  views  in  a  targeted  way  and  is  organised  in 
cooperation with the Commission’s partners in the Enterprise Europe Network. 
The list of these meetings is annexed to the impact assessment. 
Register of Commission expert groups and other similar entities (europa.eu) 
https://publications.europa.eu/en/publication-detail/-/publication/400ecc74-9a54-11e5-b3b7-
01aa75ed71a1 
COM (2016) 534 final 
https://www.europarl.europa.eu/doceo/document/TA-8-2019-0042_EN.html 
Final opinion 2021_SBGR2_06 Late payments_fup_0.pdf (europa.eu) 
https://www.intrum.com/publications/european-payment-report/  
SME Performance Review (europa.eu) 
https://publications.jrc.ec.europa.eu/repository/handle/JRC121059 

EN 

4 

  EN 

 
 
Assessing  the  economic  impact  of  faster  payments  in  B2B  transactions25,  and  the  European 
Commission studies on B2B transactions26 and on ‘Building a responsible payment culture’27.  

The  Commission  has  also  taken  into  account  several  recent  European  Court  of  Justice 
judgments. The proposed text of the regulation clarifies that flat fee compensation is due per 
invoice and not per contract, as established by the preliminary ruling in case C-585/20 of 20 
October 202228. In the same ruling the Court also clarified that the procedure of verification 
or acceptance of goods or services shall be included in the contract only if the nature of the 
goods  or  services  warrants  such  a  procedure.  The  proposed  regulation  also  incorporates  the 
judgment in Case C-122/18 of 28 January 2020 that the obligation imposed on Member States 
by  the  Directive  pertains  to  the  effective  compliance  by  their  public  authorities  with  the 
payment  terms  it  sets  out29.  Finally,  it  clarifies  the  date  until  late  payment  interests  stop 
accruing, according to the preliminary ruling in case C-256/15 of 15 December 201630. 

• 

Impact assessment 

The Regulatory Scrutiny Board examined the Impact Assessment report on 10 May 2023 and 
issued a positive opinion with reservations on 12 May 202331. The Board’s recommendations 
were  addressed  in  the  final  version  of  the  Impact  Assessment.  The  Impact  Assessment 
analysed  different  policy  options  for  achieving  three  specific  objectives.  Under  the  first 
objective, ‘to prevent late payment from occurring’, the policy measures identified (PO1) 
focus on the negotiation stage of a commercial transaction, because payment delays are often 
the  result  of  undue  or  unfair  payment  terms  in  the  contract.  Different  options  for  the 
maximum payment term in B2B transactions were assessed, including the maximum duration 
of  the  verification  procedure  to  ascertain  goods’  or  services’  compliance  with  the  contract 
requirements. The option of  making credit management and financial literacy  training  more 
widely  available  to  SMEs  and  making  it  easier  for  them  to  access  them,  as  a  preventive 
measure, was also assessed. Under the second objective, ‘to facilitate timely payments’, the 
policy  measures  identified  (PO2)  aim  to  combat  late  payment  by  ensuring  that  the  rules  on 
payment are  enforced,  and payment terms are respected, by making  the  payment of interest 
and  compensation  compulsory  and  reviewing  the  amount  of  flat  fee  compensation.  Options 
relating to enforcement and synergies with public procurement procedures were also assessed. 
For the third objective ‘to strengthen redress mechanisms, ensure fair payment conditions 
and  empower  companies’,  the  policy  measures  identified  (PO3)  focus  on  fairness  and  the 
availability of effective redress mechanisms.  

25 
26 

27 

28 

29 

30 

31 

https://publications.jrc.ec.europa.eu/repository/handle/JRC130205 
https://publications.europa.eu/en/publication-detail/-/publication/c8b7391b-9b80-11e8-a408-
01aa75ed71a1/language-en/format-PDF/source-103408786 
https://op.europa.eu/en/publication-detail/-/publication/cb4bc1bd-1467-11ed-8fa0-
01aa75ed71a1/language-en/format-PDF/source-search 
Judgment of 20 October 2022,  BFF Finance Iberia SAU v Gerencia Regional de Salud de la Junta de 
Castilla y León (OJ C 53, 15.2.2021, p. 19) C585/20, EU:C:2022:806, paragraphs 42 and 53. 
Judgment  of  28  January  2020,  European  Commission  v  Italian  Republic.  C-122/18,  EU:C:2020:41, 
paragraph 53. 
Judgment  of  15  December  2016,  Drago  Nemec  v  Republika  Slovenija.  C-256/15,  EU:C:2016:954, 
paragraph 59. 
https://single-market-economy.ec.europa.eu/system/files/2023-
09/SEC_2023_313_1_IMPACT_ASSESSMENT_OPINION_EN_V2_P1_2888389.PDF 
https://single-market-economy.ec.europa.eu/system/files/2023-
09/SWD_2023_313_1_EN_resume_impact_assessment_part1_v3.pdf 

EN 

5 

  EN 

 
 
 
 
The preferred option: the assessment shows that each option has potential benefits but also 
carries  some  risks  if  implemented  on  its  own.  The  preferred  package  of  measures  therefore 
brings  together  the  most  effective  sub-options  from  PO1,  PO2  and  PO3.  The  package  has 
several  advantages  compared  to  each  policy  option  in  isolation,  and  largely  eliminates  the 
inherent risks of each. Capping payment terms, as in PO1a, is likely to be significantly more 
effective  when  accompanied  by  strong  enforcement  measures  and  deterrents  against  paying 
late, as in PO2a. The dissuasive power of the automatic payment of interest and compensation 
will  increase  when  the  chance  to  circumvent  these  provisions  by  negotiating  unfairly  long 
payment  terms  is  eliminated.  Measures  under  PO3b  will  provide  additional  support  for  the 
package. The impact assessment conservatively assumes that a 35% reduction in late payment 
is  realistic by  adding  together  the reductions in  payment delays of 23.4% from  PO1, 17.8% 
from PO2, and 5.5% from PO3, assuming there is some overlap between the different options. 
The assessment of the option related to the form of the legal act concludes that a Regulation is 
the preferred form. 

Preferred policy package 1a+2a+3b 

Capping payment terms at 30 days in B2B transactions  

Verification or acceptance procedure capped at 30 days (no derogation) 

EU  Member  States  facilitate  availability  of  credit  management  and  financial  literacy  training, 
including digital payment tools for SMEs.  

Late payment interest is automatic (‘entitlement’ concept eliminated), the ending day for accrual 
of interest is clarified. 

Flat  fee  compensation  owed  for  each  transaction  paid  late  and  increased  to  EUR  50  to  reflect 
inflation. 

EU  Member  States  to  designate  bodies  responsible  for  enforcing  the  law,  carrying  out 
investigations on their own  initiative or through complaints, empowered to issue administrative 
sanctions and publish the name of offenders. Use of digital tools for more effective enforcement.  

In  public  works  contracts,  contracting  authorities  and  contracting  entities  must  check  that 
payment to the main contractor has been passed onto the direct subcontractors. 
EU Member States to set up a national system of mediation to solve payment disputes in 
commercial transactions. 

EU Member States to address the question of unfair contractual terms and practices through their 
national law  

The preferred package generates some one-off costs for businesses. Capping payment terms at 
30  days  and  making  the  payment  of  interest  mandatory  yields  one-off  adjustment  costs  for 
updating standard terms to reflect maximum payment terms (EUR 56.1 million) and adjusted 
compensation fees (EUR 243 million). However, if both policy options are adopted together, 
both  changes  can  be  made  with  one  adjustment  (EUR 243  million).  The  preferred  package 
imposes  on  debtors  recurring  enforcement  costs  of  the  automatic  payment  of  compensation 
(EUR 228.3 million interest, EUR 3.23 billion fees) – a direct benefit for creditors, however – 
and a recurring enforcement cost of direct regulatory fines (EUR 136.8 million). These costs 
are  avoided  completely  if  companies  respect  the  rules  and  pay  on  time.  The  overall  net 
economic benefit will be positive because cash flows will become more predictable and easier 
to  manage  for  companies.  The  administrative  costs  for  main  contractors  in  public  works 
contracts of providing proof of payment to subcontractors amount to EUR 2.2 million for the 
whole EU.  

The preferred option will benefit public authorities in several ways. The main benefit stems 
from  the  overall  expected  reduction  in  late  payments,  meaning  fewer  bankruptcies  and 

EN 

6 

  EN 

 
associated  costs  for  the  public  purse.  The  administrative  fines  that  national  enforcement 
bodies may collect from companies that pay late, estimated at up to EUR 136.8 million, can 
also help defray the enforcement bodies’ costs. Public authorities should also benefit from the 
mediation systems envisaged in PO3b, both directly (if the public authority wishes to settle a 
dispute with a supplier) and indirectly (through relief on the judicial system). 

Public  authorities  will  have  some  costs  to  bear. Providing  access  to  credit  management  and 
financial/digital  literacy  training  entails  some  adjustment  costs,  depending  on  how  Member 
States  structure  their  support,  which  is  why  no  definitive  estimate  of  costs  can  be  given. 
Recurring enforcement cost estimates for the automatic payment of compensation interest and 
fees in government to business (G2B) transactions amount to EUR 37.2 million and EUR 0.53 
billion  a  year  respectively.  These  costs  can  be  avoided  by  paying  on  time.  The  revision  of 
standard contractual conditions to include new compensation fees assumes a cost of EUR 10 
per  body,  as  in  PO2.  Member  States  that  do  not  have  enforcement  bodies  or  mediation 
systems in place will have to set them up and run them, incurring recurring enforcement costs 
estimated at  EUR 60-65  million  a year (enforcement  bodies) and  EUR 10-40 million  a year 
(mediation  services)  for  the  EU.  Verifying  that  subcontractors  are  paid  on  time  in  public 
works contracts under the Public Procurement Directives is left to Member States’ discretion, 
in which case a possible recurring enforcement cost would not require additional resources.  

This  initiative  contributes  to  the  achievement  of  several  Sustainable  Development  Goals 
(SDGs).  By  contributing  indirectly  to  economic  growth,  it  will  create  a  better  business 
environment in the single market (SDG 8). Stakeholder consultations have confirmed that late 
payment  is  the  main  cause  of  anxiety  and  stress  and  undermines  trust  in  the  market. 
Increasing the availability of and making it easier to access credit management and financial 
literacy improves quality education (SDG 4). By making things fairer, by increasing SMEs’ 
access  to  financial  services,  including  affordable  credit,  and  making  it  easier  for  them  to 
integrate into value chains and markets, this revision contributes to the achievement of SDG 
9.  This  revision  is  compliant  with  the  climate-neutrality  objectives  of  Regulation  EU 
2021/1119 of the European Parliament and of the Council of 30 June 2021. 

• 

Regulatory fitness and simplification 

The  proposed  Regulation  will  simplify  matters  with  a  uniform  and  binding  approach  to 
combating late payment, applicable to companies of all sizes, with no exceptional treatment 
for  SMEs.  All  measures  have  been  conceived  of  with  SMEs  in  mind,  but  companies  of  all 
sizes  will  ultimately  benefit  from  them.  However,  as  microenterprises  are  more  affected  by 
late payments than other SMEs, the expected benefits are more likely to materialise as better 
performance of companies with zero to nine employees.  

The benefits  of simplification  will  come from  setting  strict and uniform  payment terms  that 
will  result  in  less  time-consuming  negotiations.  Capping  payment  terms  will  diminish  the 
‘fear factor’ experienced by smaller market players who currently often accept unfair payment 
terms  when  dealing  with  bigger  market  players.  At  least  30%  of  EU  SMEs  are  expected  to 
benefit directly from this provision. Combining the capping of payment terms with deterrents 
such  as  making  interest  and  (increased)  compensation  automatically  due,  should  reduce  the 
number of invoices paid  late,  as well  as significantly  reducing  the  costs  associated  with  the 
hassle  involved  in  and  the  time  spent  chasing  up  late  payers.  The  number  of  person-days  a 
year a company spends chasing up late payments has been estimated from 5 days in Germany 

EN 

7 

  EN 

 
to over 15 days in Spain32. Even based on very conservative assumptions, an annual total of 
27.4  million  man-hours  could  be  saved  for  the  EU-27  economy,  the  equivalent  of 
EUR 5 845.4 million, by deterring late payment. 

Capping the length of the payment term and the verification procedure will help to make cash 
flows more predictable. The proposal will also redistribute the financial burden and costs on 
fair terms, by making sure that each company pays for the liquidity it needs. As matters stand, 
it  is  very  administratively  burdensome  for  smaller  companies,  or  companies  with  a  weaker 
market  position,  to  obtain  financing  at  a  cost  that  factors  in  their  level  of  risk.  At  the  same 
time, late payments give companies in a less risky position, and for whom it is easier and less 
costly to obtain financing, hassle-free commercial credit.  

Finally,  the  proposal  will  make  it  easier  for  companies  to  assert  their  rights  by  facilitating 
access to effective redress through mediation, where currently a judicial procedure is the only 
available,  and  often  more  costly  and  time-consuming,  option.  Mediation  would  allow 
companies to save EUR 27 million a year in avoided court cases. 

• 

Impact on competitiveness 

The proposal is likely to have a positive impact on price/cost and innovation competitiveness. 
With an increased, more stable and predictable aggregated cash flow, companies have more 
liquidity  to  invest  in  innovation  or  can  pass  cost  reductions  on  to  consumers.  The  cost  of 
financing goes down as banks directly finance their own clients’ risks. The proposed initiative 
would  also  make  the  conditions  for  doing  business  more  predictable,  resulting  in  a  more 
favourable  business  environment.  It  is  expected  to  benefit  all  market  players,  but  to  have  a 
greater  impact  on  SMEs  than  on  large  companies.  Large  companies  are  more  likely  than 
SMEs to pay late, so they are more likely to bear some of the costs identified in the preferred 
policy option.  

From an international competitiveness point of view, companies conducting import or export 
transactions  are  bound  to  come  up  against  mismatches  in  the  length  of  payment  terms 
(between  their  accounts  payable  and  receivable).  Companies  will  need  to  manage  the  risks 
arising  from  these mismatches,  for example by  agreeing  with  their international  partners on 
the law applicable to the contract, which will define which party is assuming those risks. It is 
then up to  that  party to  find an  appropriate  way  of funding the mismatch. This  is assuming 
that the risks, including the risk of not being paid, are addressed under market conditions by 
trade  finance  providers  (by  means,  for  example,  of  cash  in  advance,  a  letter  of  credit,  open 
accounts  or  consignments33).  These  trade  finance  solutions  significantly  limit  the  impact  of 
the introduction of a mandatory cap on payment terms.  

The  risk  that,  in  international  transactions,  companies  would  systematically  choose  long 
payment  terms  under  the  laws  of  non-EU  countries  to  undercut  companies  insisting  on  EU 
rules,  is  also  estimated  to  be  limited.  Many  EU  partner  countries,  such  as  Canada,  the  US, 
Türkiye and the UK, already impose legislation on late payments. This scenario has not really 
materialised in the EU, where some countries such as the Netherlands have imposed stricter 
legislation on payments than others.  

32 

33 

https://www.sage.com/en-gb/blog/wp-content/uploads/sites/10/2017/12/Domino-Effect-Late-Payments-Research-
Sage.pdf 
https://www.trade.gov/methods-payment 

EN 

8 

  EN 

 
 
• 

ICT developments taken into account 

The Late Payment Directive came into force in a world that was significantly less digital. In 
the 10 years of its implementation, digitalisation has had a profound impact on all aspects of 
society,  including  how  companies  are  managed,  transforming  how  companies  communicate 
or  market  their  products  and  services.  This  proposal’s  measures  fit  into  this  contemporary 
mould and are therefore ‘digital by default’.  

Digital tools and solutions play a significant role in some of the proposed measures and will 
affect their feasibility and cost-effectiveness. This is the case for the obligation to designate 
bodies responsible for enforcing  payment  rules.  Member States  are  also  asked  to  encourage 
SMEs to use digital tools that help getting paid faster, and to make it easier for them to access 
financial  literacy  and  credit  management  training,  including  training  on  how  to  use  digital 
payment tools. 

• 

Fundamental rights 

The  proposal  will  support  the  implementation  of  Article  16  of  the  Charter  of  Fundamental 
rights  concerning  the  freedom  to  conduct  a  business.  Prompt  payments  increase  trust  in  the 
market and spur entrepreneurship.  

4. 

BUDGETARY IMPLICATIONS 

The proposal is expected to have a certain budgetary impact on Member States. This impact is 
described in the relevant section of the impact assessment.  

The proposal is  not  expected to affect  the EU budget in any way.  The  current  EU Payment 
Observatory34 could support the monitoring of the proposal using existing resources. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation, and reporting arrangements 

The degree of success of the initiative will be measured in terms of its reaching these targets: 

• 

• 

reducing by 35% the proportion of companies that report late payments as a problem 
(progress will be measured against the benchmark value from the 2022 Survey on the 
Access to Finance of Enterprises for all companies: the target is 28%, from a baseline 
of 43%);  

reducing by 35% the proportion of companies in each individual size class that report 
late  payments  as  a  problem  (progress  will  be  measured  against  the  baseline  values 
from the  2022 Survey on  the Access to Finance  of Enterprises for size  classes (the 
target is between 26% and 31%, from a baseline of 40% to 47%). 

The  Commission  will  monitor  and  evaluate  the  impacts  of  the  policy  options  on  late 
payments, 4 years after the entry into force of the proposed Regulation. The application of EU 
rules and their impact could  be monitored  in  annual  reports  produced by  Member States  on 
their own initiative, complemented by private sector reports produced by third parties. Such 
reports usually contain details of payment performance in B2B transactions in Member States 

34 

https://single-market-economy.ec.europa.eu/smes/sme-strategy/late-payment-directive/eu-payment-
observatory_en#:~:text=The%20EU%20Observatory%20of%20Payments,commercial%20transactions
%20in%20the%20EU. 

EN 

9 

  EN 

 
 
and compliance with EU rules, as well as the activity of enforcement authorities in terms of, 
for example, the number  of  complaints received and the number of investigations launched. 
The  annual  reports  should  be  discussed  by  the  Commission  and  the  national  competent 
authorities. The current EU Payment Observatory could also provide support, in the form of 
thematic reports, where necessary. 

There is more information, including a non-exhaustive list of possible monitoring indicators, 
in Annex 24 to the Impact Assessment. 

• 

Detailed explanation of the specific provisions of the proposal 

Article 1 (Scope) confirms the current scope and clarifies that the regulation will not apply to 
payments  for  transactions  with  consumers,  payments  made  as  compensation  for  damages, 
payments  in  relation  to  debts  that  are  subject  to  insolvency  proceedings,  including 
proceedings  that  are  subject  to  debt  restructuring.  The  current  Late  Payment  Directive 
mentions all these exceptions, but this new text makes it clearer by putting them all together 
in Article 1.  

Article  2  (Definitions)  keeps  most  of  the  current  Directive’s  definitions,  and  adds  new 
definitions of the ‘procedure of acceptance or verification’, ‘debtor’ and ‘creditor’. 

Article  3  (Payment  periods)  is  stricter  than  the  current  Directive’s  Articles  3  and  4,  by 
limiting the payment period and the duration of the procedure of acceptance or verification to 
a  maximum  of  30  days,  and  by  eliminating  any  reference  to  the  concept  of  grossly  unfair 
practices and clauses.  

The  exceptions  for  a  maximum  payment  period  of  60  days  for  healthcare  and  public 
authorities carrying out economic activities, as set out in Article 4(4)(a) and Article 4(4)(b) of 
the current Directive, are removed.  

The  Article  explains  that  the  provisions  of  this  Regulation  are  without  prejudice  to  shorter 
periods which may be provided for in national law. 

Article 4 (Payments  to  subcontractors  in public  procurement) is a new provision to support 
that payments  are  passed down the supply  chain  in contracts for public  works, by requiring 
the main contractor to prove that direct subcontractors have been paid. 

Article 5 (Interest for late payment) is a new provision. It builds on the provisions in Articles 
3 and 4 of the current Directive and clarifies that interest for late payment is automatically due 
when the necessary conditions are satisfied. It also requires the debtor to give the creditor all 
the  information  they  need  to  ensure  an  invoice  can  be  accepted.  This  new  Article  5  also 
clarifies that interest for late payment accrues until payment of the principal, in line with case 
law. 

Article 6 (Rate of the interest for late payment) is new. It harmonises the rate of interest for 
late payment. 

Article 7 (Payment schedules) reflects what is in Article 5 of the current Directive. 

Article 8 (Compensation for recovery costs) corresponds to Article 6 of the current Directive. 
It brings lump  sum  compensation into line  with inflation and clarifies that this  lump sum is 
payable for each individual transaction that is paid for late.  

EN 

10 

  EN 

 
Article 9 (Null and void contractual terms and practices) is new. It replaces Article 7 of the 
current Directive. It removes the concept of ‘grossly unfair’ and lays down a list of practices 
null and void under the Regulation. 

Article 10 (Retention of title) corresponds to Article 9 of the current Directive. 

Article 11 (Transparency) corresponds to Article 8 of the current Directive. 

Article  12  (Recovery  procedures  for  unchallenged  claims)  corresponds  to  Article  10  of  the 
current Directive.  

Article  13  (Enforcement  authorities)  is  new.  It  states  that  Member  States  are  obliged  to 
designate national authorities responsible for enforcing the Regulation, who are to cooperate 
with the Commission and with other relevant national enforcement authorities. 

Article  14  (Powers  of  enforcement  authorities)  is  new.  It  lists  the  powers  enforcement 
authorities must have to ensure the Regulation is enforced. 

Article  15  (Complaints  and  confidentiality)  is  new.  It  sets  out  the  conditions  under  which 
creditors  and  associations  of  creditors  can  complain  about  late  payments,  as  well  as  the 
obligations of the enforcement authorities in relation to complaints. 

Article 16 (Alternative dispute resolution) is new. It promotes the voluntary use of effective 
and  independent  alternative  dispute  resolution  mechanisms  for  a  quicker  settlement  of 
disputes between creditors and debtors, without damaging their commercial relationship. 

Article 17 (Digital tools, credit management and financial literacy training) is new. Its aim is 
to  ensure  the  use  of  digital  tools  for  enforcing  the  Regulation  and  the  promotion  of  credit 
management tools and financial literacy training for SMEs, to reduce late payment. 

Article  18  (Report),  corresponds  to  Article  11  of  the  current  Directive,  and  states  that  the 
Commission is to report on the implementation of the Regulation 4 years after its entry into 
force. 

Article  19  (Repeal)  is  the  equivalent  of  Article  13  of  the  current  Directive,  adapted  to  a 
Regulation. 

Article  20  (Entry  into  force  and  application)  is  the  equivalent  of  Article  14  of  the  current 
Directive, adapted to a Regulation. 

EN 

11 

  EN 

 
2023/0323 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on combating late payment in commercial transactions 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee1,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1)  Most  goods  and  services  are  supplied  within  the  internal  market  by  economic 
operators to other economic operators and to public authorities on a deferred payment 
basis whereby the supplier gives its client time to pay the invoice, as agreed between 
parties, as set out in the suppliers’ invoice, or as laid down by law.  

(2)  Many  payments  in  commercial  transactions  between  economic  operators  or  between 
economic operators and public authorities are made later than agreed in the contract or 
laid down in the general commercial conditions or by law.  

(3) 

Late payments directly affect liquidity and predictability of cash flows, thus increasing 
working  capital  needs  and  compromising  a  company’s  access  to  external  financing. 
This affects competitiveness, reduces productivity, leads to redundancies, increases the 
likelihood  of  insolvencies  and  bankruptcies  and  is  a  critical  barrier  for  growth.  The 
damaging effects of late payments spread along supply chains, as the payment delay is 
often passed onto suppliers. Small and medium sized enterprises (SMEs), who rely on 
regular  and  predictable  streams  of  cash,  are  heavily  affected  by  those  negative 
consequences.  Late  payment  thus  represents  a  problem  for  the  Union  economy 
because of its negative economic and social consequences.  

(4) 

Although judicial claims related to late payment are already facilitated by Regulations 
(EC)  No  805/20042,  (EC)  No  1896/20063,  (EC)  No  861/20074  and  (EU)  No 

1 
2 

3 

4 

OJ C , , p. . 
Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating 
a European Enforcement Order for uncontested claims (OJ L 143, 30.04.2004, p. 15) 
Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 
creating a European order for payment procedure (OJ L 399, 30.12.2006, p. 1).  
Regulation  (EC)  No  861/2007  of  the  European  Parliament  and  of  the  Council  of  11  July  2007 
establishing a European Small Claims Procedure (OJ L 199, 31.7.2007, p. 1). 

EN 

12 

  EN 

 
 
1215/20125 of the European Parliament and of the Council, in order to discourage late 
payment  in  commercial  transactions  it  is  necessary  to  lay  down  complementary 
provisions.  

Undertakings should be able to trade throughout the internal market under conditions 
which  ensure  that  transborder  operations  do  not  entail  greater  risks  than  domestic 
sales. Distortions of competition would ensue if substantially different rules applied to 
domestic and transborder operations.  
Directive 2011/7/EU of the European Parliament and of the Council6 lays down rules 
to combat late payment in commercial transactions. In 2019, the European Parliament 
identified several shortcomings of that Directive. The SME Strategy for a sustainable 
and  digital  Europe7  called  for  ensuring  a  ‘late-payment-free’  environment  for  SMEs 
and strengthening the enforcement of Directive 2011/7/EU. In 2021, the Fit for Future 
Platform  highlighted  critical  issues  in  the  implementation  of  that  Directive  in  its 
opinion.  The  main  shortcomings  identified  in  these  initiatives  are  related  to:  the 
ambiguous  provisions  on  ‘grossly  unfair’  regarding  the  deadlines  for  payment  in 
business  to  business  transactions  (B2B),  the  unfair  payment  practices  and  the 
deadlines for the procedures of acceptance and verification; the flat fee compensation; 
the  asymmetry  of  rules  for  payments  terms  between  G2B  and  B2B  transactions;  the 
lack of a maximum payment term for commercial transactions in B2B transactions; the 
lack of monitoring of compliance and enforcement; the absence of tools to combat the 
asymmetries of information; as well as tools for creditors to take action against their 
debtors, and the lack of synergies with the public procurement framework.  

To address those shortcomings, Directive 2011/7/EU should be replaced. 

Provisions should be laid down to prevent late payments in commercial transactions, 
consisting in the delivery of goods or supply of services for remuneration, irrespective 
of  whether  they  are  carried  out  between  undertakings  or  between  undertakings  and 
contracting authorities/entities, where the latter are the debtor, given these contracting 
authorities/entities handle a considerable volume of payments to undertakings.  

Public  work  contracts  and  building  and  engineering  works  are  very  often  subject  to 
excessively  long  payment  terms  and  delays.  Therefore,  this  Regulation  should  also 
apply to these activities.  

(5) 

(6) 

(7) 

(8) 

(9) 

(10)  Transactions with consumers, payments made as compensation for damages, including 
payments  from  insurance  companies,  and  obligations  to  pay  that  can  be  cancelled, 
postponed,  or  waived  under  or  in  relation  to  insolvency  proceedings  or  restructuring 
proceedings,  including  preventive  restructuring  proceedings  under  Directive  (EU) 
2019/10238 of the European Parliament and of the Council, should be excluded from 
the scope of this Regulation.  

5 

6 

7 
8 

Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on 
jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 
351, 20.12.2012, p. 1). 
Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating 
late payment in commercial transactions (OJ L 48, 23.2.2011, p. 1). 
COM (2020) 103 final.  
Directive  (EU)  2019/1023  of  the  European  Parliament  and  of  the  Council  of  20  June  2019  on 
preventive  restructuring  frameworks,  on  discharge  of  debt  and  disqualifications,  and  on  measures  to 
increase  the  efficiency  of  procedures  concerning  restructuring,  insolvency  and  discharge  of  debt,  and 
amending Directive (EU) 2017/1132 (OJ L 172, 26.6.2019, p. 18). 

EN 

13 

  EN 

 
 
(11)  Late payment constitutes a breach of contract which is financially attractive to debtors, 
due to low or no interest rates charged on late payment, or slow procedures for redress. 
A decisive shift to a culture of prompt payment, including one in which the exclusion 
of the right to charge interest for late payment is null and void, is necessary to reverse 
this trend and to discourage late payment. Consequently, contractual payment periods 
should be limited to 30 calendar days both in B2B transactions and G2B transactions, 
where the public authority is the debtor. 

(12)  The  procedures  of  acceptance  or  verification  for  ascertaining  the  conformity  of  the 
goods  or  services  provided  with  the  requirements  of  the  contract,  as  well  as 
verification of the correctness and conformity  of the invoice, are often used to  delay 
intentionally  the  payment  period.  Their  inclusion  in  the  contract  should  therefore  be 
objectively justified by the particular nature of the contract in question or by certain of 
its  characteristics9.  It  should  therefore  be  possible  to  provide  for  such  procedure  of 
verification or acceptance in a contract only when provided for in national law where 
necessary,  due  to  the  specific  nature  of  the  goods  or  services.  To  avoid  that  the 
procedure  of  acceptance  or  verification  is  used  to  extend  the  payment  period,  the 
contract should  clearly describe the  details  of such procedure, including  its duration. 
For  the  same  purpose,  the  debtor  should  initiate  the  verification  or  acceptance 
procedure  immediately  upon  reception  from  the  creditor  of  the  goods  and/or  the 
services  that  are  the  object  of  the  commercial  transaction,  regardless  of  whether  the 
creditor  has  issued  an  invoice  or  equivalent  request  for  payment.  In  order  not  to 
jeopardise the achievement of the objectives of this Regulation, it is appropriate to set 
a maximum duration of a procedure of acceptance or verification.  

(13)  This Regulation should be without prejudice to shorter periods which may be provided 

for in national law, and which are more favourable to the creditor.  

(14)  Public  procurement  can  play  a  significant  role  in  improving  payment  performance. 
Enhanced  synergies  should  therefore  be  put  in  place  between  public  procurement 
policies and rules and prompt payment objectives. Particularly in public construction 
works,  subcontractors  are  often  not  paid  on  time  by  the  main  contractor,  even  when 
the contracting authorities or contracting entities have made the contractual payments 
to them, thus potentially creating a damaging domino-effect in the supply chain. It is 
therefore  appropriate  that  contractors  provide  evidence  to  contracting  authorities  and 
contracting entities of payments to their direct subcontractors. 

(15) 

In  the  interest  of  consistency  of  Union  legislation,  the  definition  of  ‘contracting 
authorities’  and  ‘contracting  entities’  in  Directives  2014/23/EU10,  2014/24/EU11, 
2014/25/EU12 and 2009/81/EC13 of the European Parliament and of the Council should 
apply for the purposes of this Regulation.  

9 

10 

11 

12 

13 

Judgment of 20 October 2022,  BFF Finance Iberia SAU v Gerencia Regional de Salud de la Junta de 
Castilla y León (OJ C 53, 15.2.2021, p. 19) C585/20, EU:C:2022:806, paragraph 53. 
Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award 
of concession contracts (OJ L 94, 28.3.2014, p. 1 - 64). 
Directive  2014/24/EU of  the European  Parliament  and of  the  Council  of 26  February  2014 on public 
procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65-242). 
Directive  2014/25/EU  of  the  European  Parliament  and  of  the  Council  of  26  February  2014  on 
procurement  by  entities  operating  in  the  water,  energy,  transport  and  postal  services  sectors  and 
repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243–374). 
Directive  2009/81/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  procedures  for  the  award  of  certain  works  contracts,  supply  contracts  and  service 

EN 

14 

  EN 

 
 
 
(16) 

(17) 

Interest due for late payment should be calculated on a daily basis as simple interest. 
Interest for late payment is an accessory to the amount due. The debtor shall then be 
deemed  to  have  extinguished  its  obligations  only  when  the  creditor  will  receive  the 
payment  of  the  amount  due,  including  the  corresponding  interests  and  flat  fee 
compensation. The amount of the late payment interest should continue accruing until 
the payment of the amount due to the creditor.  

It should not be possible for the creditor to waive its right to obtain interests for late 
payments, as  interests for late payments have a double function:  to  offset part of the 
damage suffered by the creditor, because of the delay, and to sanction the debtor for 
the breach of contract. To facilitate receipt of interest and compensation in case of late 
payment by the creditor, the right for the creditor to obtain them should be automatic, 
except when the payment delay is not due to the debtor’s fault.  

(18)  Fair compensation of creditors for the recovery costs incurred due to late payment is 
necessary  to  discourage  late  payment.  These  costs  should  include  the  recovery  of 
administrative  costs  and  compensation  for  internal  costs  incurred  due  to  the  late 
payment and should be cumulated with interest  for the late payment for every single 
commercial transaction that has been paid late as determined by the Court of Justice14. 
The fixed minimum sum of compensation for the recovery costs should be determined 
without  prejudice  to  national  provisions  according  to  which  a  national  court  may 
award compensation to the creditor for any additional damage regarding the debtor’s 
late payment.  

(19) 

(20) 

It  should  be  possible  to  make  payments  by  instalments  or  staggered  payments. 
However, each individual  instalment  or payment should be paid  on the agreed terms 
and should be subject to the rules for late payment set out in this Regulation. 

In addition to the fixed sum to cover internal recovery costs, creditors should also be 
entitled to reasonable compensation of other recovery costs they incur because of late 
payment  by  a  debtor.  Such  costs  should  for  example  include  the  costs  incurred  by 
creditors in instructing a lawyer or employing a debt collection agency. 

(21)  Abuse of freedom of contract to the disadvantage of the creditor should be avoided. As 
a  result,  where  a  clause  in  a  contract  or  a  practice  relating  to  the  date  or  term  of 
payment,  the  payment  or  rate  of  interest  for  late  payment,  the  compensation  for 
recovery  costs, extending the duration  the procedure  of verification or acceptance or 
intentionally  delaying  or  preventing  the  moment  of  sending  the  invoice  is  not  in 
conformity with this Regulation, it should be null and void.  

(22)  To enhance the efforts to prevent the abuse of freedom of contract to the detriment of 
creditors, organisations officially recognised as representing creditors or organisations 
with  a  legitimate  interest  in  representing  undertakings  should  be  able  to  take  action 
before national courts or administrative bodies in order to prevent late payments.  

(23)  To guarantee full payment of the amount due, it is important to ensure that the seller 
retains  the  title  to  goods  until  they  are  fully  paid  for,  if  a  retention  of  title  has  been 
expressly agreed between the buyer and the seller before the delivery of the goods.  

14 

contracts  by  contracting  authorities  or  entities  in  the  fields  of  defence  and  security  and  amending 
Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.08.2009, p. 76-136). 
Judgement of 20 October 2022, BFF Finance Iberia SAU vs Gerencia Regional de Salud de la Junta de 
Castilla y León, C-585/20, ECLI:EU:C:2022:806. 

EN 

15 

  EN 

 
 
(24)  To  ensure  correct  application  of  this  Regulation,  it  is  important  to  provide 
transparency regarding the rights and obligations as laid down by this Regulation. To 
ensure that the correct rates of interest are applied, it is important that they are made 
public by the Member States and the Commission. 

(25)  The  sanctions  for  late  payment  can  be  dissuasive  only  if  they  are  accompanied  by 
procedures  for  redress  which  are  rapid  and  effective  for  the  creditor.  Expedient 
recovery  procedures  for  unchallenged  claims  should  therefore  be  available  to  all 
creditors who are established in the Union.  

(26)  To  facilitate  and  ensure  compliance  with  this  Regulation,  Member  States  should 
designate  authorities  responsible  for  its  enforcement,  which  perform  their  duties  and 
tasks  in  an  objective  and  fair  manner  and  ensure  equal  treatment  of  private 
undertakings  and  public  authorities.  Those  enforcement  authorities  should  carry  out 
investigations  on  their  own  initiative,  act  on  complaints,  and  be  empowered,  among 
other  things,  to  impose  sanctions  and  publish  their  decisions  on  a  regular  basis.  In 
addition, for more effective enforcement, Member States should use digital tools to the 
extent possible.  

(27)  To  ensure  easy  and  accessible  means  of  redress,  Member  States  should  promote  the 
voluntary use of effective and independent alternative dispute resolution mechanism to 
solve payment disputes in commercial transactions.  

(28) 

Invoices  trigger  requests  for  payment  and  are  important  documents  in  the  chain  of 
transactions for the supply of goods and services, inter alia, for determining payment 
deadlines.  It  is  important  to  promote  systems  that  give  legal  certainty  as  regards  the 
exact  date of receipt of invoices  by the debtors, including in  the field  of  e-invoicing 
where the receipt of invoices could generate electronic evidence, and which is partly 
governed  by 
in  Council  Directive 
2006/112/EC15  and  Directive  2014/55/EC16  of  the  European  Parliament  and  the 
Council.  

invoicing  contained 

the  provisions  on 

(29)  Effective  access  of  undertakings,  especially  of  SMEs,  to  credit  management  and 
financial  literacy  training  can  have  a  significant  impact  in  reducing  payment  delays, 
maintaining  optimal  cash  flows,  reducing  the  risk  of  default  and  increasing  the 
potential  for  growth.  Nevertheless,  SMEs  often  lack  the  capacity  to  invest  in  such 
training,  while  very  limited  trainings  and  training  material  focusing  on  enhancing 
SMEs’  knowledge  of  credit  and  invoice  management  are  currently  available.  It  is 
therefore  appropriate  to  provide  that  Member  States  need  to  ensure  that  credit 
management  and  financial  literacy  trainings  are  available  and  accessible  to  SMEs, 
including on the use of digital tools for timely payments. 

(30)  Certain  provisions  in  this  Regulation  are  linked  to  the  provisions  in  Directive  (EU) 
2019/633 of the European Parliament and of the Council17. The relationship between 
Directives  2011/7/EU  and  (EU)  2019/633  is  explained  in  recitals  (17)  and  (18)  and 
Article  3(1)  of  Directive  (EU)  2019/633.  As  this  Regulation  replaces  Directive 

15 

16 

17 

Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 
347, 11.12.2006, p. 1). 
Directive  2014/55/EU  of  the European  Parliament  and  of  the  Council  of 16  April  2014 on  electronic 
invoicing in public procurement (OJ L 133, 6.5.2014, p. 1). 
Directive (EU) No 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair 
trading practices in business-to-business relationships in the agricultural and food supply chain (OJ L 
111, 25.4.2019, p. 59).  

EN 

16 

  EN 

 
 
2011/7/EU,  it  should  not  affect  the  rules  laid  down  in  Directive  (EU)  2019/633, 
including  the  provisions  that  are  applicable  to  payments  made  in  the  context  of  the 
school  scheme18,  value-sharing  agreements19  and  certain  payments  for  the  sale  of 
grapes, must and wine in bulk in the wine sector20, except for the deadlines applicable 
to the maximum payment periods concerning the supply of non-perishable agricultural 
and food products. However, this Regulation does not prevent the Member States from 
introducing or maintaining national provisions applicable in the agricultural and food 
sector  which  provide  for  stricter  payment  terms,  or  different  calculation  of  payment 
periods,  dies  a  quo  and  verification  and  acceptance  procedures  for  suppliers  of 
agricultural and food products that are more favourable to the creditor. 

(31)  The  objectives  of  this  Regulation  are  to  combat  late  payment  in  commercial 
transactions, in order to ensure the proper functioning of the internal market, thereby 
fostering  the  competitiveness  of  undertakings  and  in  particular  of  SMEs.  Those 
objectives  cannot  be  sufficiently  achieved  by  the  Member  States,  as  implementing 
national solutions would likely result in a lack of uniform rules, fragmentation of the 
single market and higher costs for companies trading across borders. Therefore, those 
objectives  can  be  better  achieved  at  Union  level.  The  Union  may  therefore  adopt 
measures, in accordance with the principle of subsidiarity as set out in Article 5 of the 
Treaty  of European Union. In accordance with  the principle of proportionality  as  set 
out  in  that  Article,  this  Regulation  does  not  go  beyond  what  is  necessary  to  achieve 
those objectives.  

(32)  To  provide  sufficient  time  for  all  relevant  actors  to  put  in  place  the  arrangements 
needed to comply with this Regulation, its application should be deferred. However, to 
ensure  better  protection  of  the  creditors,  commercial  transactions  that  are  to  be  paid 
after the date of entry into force of this Regulation, shall be subject to its provisions, 
even if the relevant contract was signed before its date of application.  

HAVE ADOPTED THIS REGULATION: 

Article 1 
Scope 

1. 

2. 

18 

19 

20 

This Regulation shall apply to payments made in transactions between undertakings 
or  between  undertakings  and  public  authorities,  where  the  public  authority  is  the 
debtor,  which  lead  to  the  delivery  of  goods  or  the  provision  of  services  for 
remuneration (‘commercial transactions’).  

The  delivery  of  goods  or  the  provision  of  services  referred  to  in  paragraph  1  shall 
include the design and execution of public works, construction and civil engineering 
works. 

Article  23  of  Regulation  (EU)  No  1308/2013  of  the  European  Parliament  and  of  the  Council  of  17 
December 2013, establishing a common organisation of the markets in agricultural products (OJ L 347, 
20.12.2013, p. 671). 
Article 172a of Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 
December 2013, establishing a common organisation of the markets in agricultural products (OJ L 347, 
20.12.2013, p. 671). 
Article 147a of  Regulation (EU) No 1308/2013 of the  European Parliament and of the Council of 17 
December 2013, establishing a common organisation of the markets in agricultural products (OJ L 347, 
20.12.2013, p. 671). 

EN 

17 

  EN 

 
 
3. 

This Regulation shall not apply to any of the following payments: 

(a) 

payments for transactions with consumers; 

(b)  payments  made  as  compensation  for  damages,  including  payments  from 

insurance companies; 

(c) 

payments  resulting  from  obligations  that  can  be  cancelled,  postponed,  or 
waived  under  or  in  relation  to  insolvency  proceedings  or  restructuring 
proceedings,  including  preventive  restructuring  proceedings  under  Directive 
(EU) 2019/102321 of the European Parliament and of the Council. 

4. 

With the exception of Article 3(1), this Regulation shall not affect the provisions laid 
down in Directive (EU) 2019/633. 

For the purposes of this Regulation, the following definitions shall apply:  

Article 2 
Definitions 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

21 

‘undertaking’ means any organisation, irrespective of its form and way of financing, 
carrying out an economic or professional activity independently; 

‘public  authority’  means  any  contracting  authority,  as  defined  in  Article  6(1)  of 
Directive 2014/23/EU, Article 2(1), point (1), of Directive 2014/24/EU or in Article 
3(1) of Directive 2014/25/EU; 

‘late payment’ means payment not made within the contractual or statutory payment 
period as set out in Article 3; 

‘amount due’ means the sum which should have been paid within the contractual or 
statutory  payment  period,  as  set  out  in  Article  3,  including  the  applicable  taxes, 
duties,  levies  or  charges  specified  in  the  invoice  or  the  equivalent  request  for 
payment; 

‘enforceable  title’  means  any  decision,  judgement,  order  for  payment  issued  by  a 
court  or  other  competent  authority,  private  deed  or  any  other  document  issued, 
including those that are provisionally enforceable, whether for immediate payment or 
payment by instalments, which permits the creditor to have his or her claim against 
the debtor collected by means of forced execution;  

‘retention  of  title’  means  the  contractual  agreement  according  to  which  the  seller 
retains title to the goods in question until the price has been paid in full; 

‘procedure  of  acceptance  or  verification’  means  the  procedure  for  ascertaining  the 
conformity of the goods delivered or services provided, with the requirements of the 
contract; 

‘debtor‘  means  any  natural  or  legal  person  or  any  public  authority  that  owes  a 
payment for a good delivered or a service provided; 

‘creditor‘  means  any  natural  or  legal  person  or  any  public  authority  that  delivered 
goods to a debtor or provided services to a debtor. 

Directive  (EU)  2019/1023  of  the  European  Parliament  and  of  the  Council  of  20  June  2019  on 
preventive  restructuring  frameworks,  on  discharge  of  debt  and  disqualifications,  and  on  measures  to 
increase  the  efficiency  of  procedures  concerning  restructuring,  insolvency  and  discharge  of  debt,  and 
amending Directive (EU) 2017/1132 (OJ L 172, 26.6.2019, p. 18). 

EN 

18 

  EN 

 
 
1. 

2. 

3. 

4. 

1. 

2. 

22 

Article 3 
Payment periods 

In  commercial  transactions,  the  payment  period  shall  not  exceed  30  calendar  days, 
from the date of the receipt of the invoice or an equivalent  request  for payment  by 
the debtor, provided that the debtor has received the goods or services. This period 
shall  apply  both  to  the  transactions  between  undertakings  and  between  public 
authorities and undertakings. The same payment period shall also apply to the supply 
of non-perishable  agricultural and food products  on a regular and non-regular basis 
as  referred  to  in  Articles  3(1)(a),  point  (i),  second  indent  and  3(1)(a),  point  (ii), 
second  indent  of  Directive  (EU)  2019/633,  unless  Member  States  provide  for  a 
shorter payment period for such products. 

A  procedure  of  acceptance  or  verification  may  be  exceptionally  provided  for  in 
national law only where strictly necessary due to the specific nature of the goods or 
services.  In  that  case,  the  contract  shall  describe  the  details  of  the  procedure  of 
acceptance or verification, including its duration. 

Where  the  contract  provides  for  a  procedure  of  acceptance  or  verification,  in 
accordance  with  paragraph  2,  the  maximum  duration  of  that  procedure  shall  not 
exceed  30  calendar  days  from  the  date  of  receipt  of  the  goods  or  services  by  the 
debtor,  even  if  such  goods  or  services  are  supplied  prior  to  the  issuance  of  the 
invoice or an equivalent request for payment. In this case, the debtor shall initiate the 
procedure  for  acceptance  or  verification  immediately  upon  reception  from  the 
creditor  of  the  goods  and/or  the  services  that  are  the  object  of  the  commercial 
transaction.  The  payment  period  shall  not  exceed  30  calendar  days  after  such 
procedure has taken place. 

The  payment  period  set  out  in  paragraph  1  is  the  maximum  payment  period  and  is 
without prejudice to a shorter period which may be provided for in national law. 

Article 4 
Payments to subcontractors in public procurement 

For  public  works  contracts  falling  within  the  scope  of  Directives  2014/23/EU, 
2014/24/EU, 2014/25/EU, and 2009/81/EC22 of the European Parliament and of the 
Council, contractors shall provide evidence to  contracting authorities or contracting 
entities within the meaning of those Directives that, where applicable, they have paid 
their  direct  subcontractors  involved  in  the  execution  of  the  contract  within  the 
deadlines and under the conditions set out in this Regulation. The evidence may take 
the  form  of  a  written  declaration  by  the  contractor  and  shall  be  provided  by  the 
contractor  to  the  contracting  authority  or  contracting  entity  prior  to,  or  at  the  latest 
together with, any request for payment.  

Where the contracting authority or contracting entity has not received the evidence as 
provided  for  in  paragraph  1  or  has  information  of  a  late  payment  by  the  main 
contractor to its direct subcontractors, the contracting authority or contracting entity 
shall notify the enforcement authority of its Member State thereof without delay. 

Directive  2009/81/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  procedures  for  the  award  of  certain  works  contracts,  supply  contracts  and  service 
contracts  by  contracting  authorities  or  entities  in  the  fields  of  defence  and  security,  and  amending 
Directives 2004/17/EC and 2004/18/EC. 

EN 

19 

  EN 

 
 
1. 

2. 

3. 

4. 

5. 

6. 

Article 5 
Interest for late payment  

In  case  of  late  payment,  the  debtor  shall  be  liable  to  pay  interest  for  late  payment, 
except where the debtor is not responsible for the payment delay. 

Interest  for  late  payment  shall  be  automatically  due  by  the  debtor  to  the  creditor, 
without the creditor needing to send a reminder, where the following conditions are 
satisfied:  

(a) 

the creditor has fulfilled its contractual obligations and obligations provided for 
by law; 

(b) 

the debtor has received the invoice or equivalent request for payment; 

(c) 

 the  creditor  has  not  received  the  amount  due  specified  in  the  invoice  or  the 
equivalent  request  for  payment,  within  the  contractual  or  statutory  payment 
period as set out in Article 3. 

It  shall  not  be  possible  for  the  creditor  to  waive  its  right  to  obtain  interest  for  late 
payment. 

The  date  of  receipt  of  the  invoice,  or  equivalent  request  for  payment,  shall  not  be 
subject to a contractual agreement between the debtor and the creditor.  

The  debtor  shall  provide  all  relevant  information  to  the  creditor  to  ensure  that  the 
creditor’s invoice or equivalent request for payment is accepted and processed by the 
debtor as soon as it is received.  

Where  the  conditions  set  out  in  paragraph  2  are  satisfied,  interest  for  late  payment 
shall start accruing from the last one of the following events: 

(a) 

receipt by the debtor of the invoice or an equivalent request for payment; 

(b) 

receipt by the debtor of the goods or services. 

7. 

The interest for late payment shall accrue until payment of the amount due.  

Article 6 
Rate of the interest for late payment 

1. 

2. 

3. 

4. 

The  interest  for  late  payment  shall  be  equal  to  the  reference  rate  plus  8  percentage 
points.  

Member  States  whose  currency  is  the  euro,  shall  ensure  that  the  reference  rate 
corresponds to either of the following: 

(a) 

(b) 

the interest rate applied by the European Central Bank to its main refinancing 
operations;  

the marginal interest rate resulting from variable-rate tender procedures for the 
most recent main refinancing operations of the European Central Bank.  

In Member States whose currency is not the euro the reference rate shall be the rate 
set by its national central bank.  

The  reference  rate  for  the  first  semester  of  the  year  concerned  shall  be  the  rate  as 
determinable on 1 January of that year. The reference rate for the second semester of 
the year concerned shall be the rate as determinable on 1 July of that year.  

EN 

20 

  EN 

 
Article 7 
Payment schedules 

Where  payment  is  done on  the  basis  of  schedules  providing  for  instalments,  and  any  of  the 
instalments  is  not  paid  by the agreed date, interest  for late payment referred to  in  Article 5, 
shall be calculated on the basis of  any overdue  amount. Compensation shall also  be paid  in 
accordance with Article 8. 

Article 8 
Compensation for recovery costs 

1. 

2. 

3. 

4. 

5. 

Where interest for late payment becomes payable in accordance with Article 5, a  flat 
fee compensation for recovery costs shall be automatically due by the debtor to the 
creditor  and  shall  amount  to  a  fixed  sum  of  EUR 50,  per  every  single  commercial 
transaction.  

The  flat fee compensation referred to in paragraph 1 shall be payable by the debtor 
to the creditor as a compensation for the creditor’s own recovery costs, without the 
necessity of a reminder.  

It  shall  not  be  possible  for  the  creditor  to  waive  its  right  to  obtain  the  flat  fee 
compensation laid down in paragraph 1. 

In addition to the flat fee compensation referred to in paragraph 1, the creditor shall 
be entitled to obtain reasonable compensation from the debtor for any recovery costs 
exceeding that flat fee compensation and incurred due to the debtor’s late payment.  

This Article shall apply without prejudice to the creditor’s rights to receive any other 
compensation. 

Article 9 
Null and void contractual terms and practices 

1. 

The following contractual terms and practices shall be null and void: 

(a) 

(b) 

setting the payment period in breach of Article 3; 

excluding or limiting the right of the creditor to obtain interest for late payment 
provided for in Article 5 or the right to obtain compensation for recovery costs 
provided for in Article 8; 

(c) 

extending  the  duration  of  the  procedure  of  verification  or  acceptance  beyond 
the term set in Article 3(3); 

(d) 

intentionally delaying or preventing the moment of sending the invoice. 

2. 

3. 

Member  States  shall  ensure  that  adequate  and  effective  means  exist  to  end  the 
contractual terms and practices referred to in paragraph 1. 

The means referred to in paragraph 2 shall include the possibility for an organisation 
officially  recognised  as  representing  creditors  or  organisations  with  a  legitimate 
interest  in  representing  undertakings  to  take  action  before  the  courts  or  before 
competent administrative bodies.  

EN 

21 

  EN 

 
Article 10 
Retention of title 

A creditor shall retain title to goods until they are fully paid for if a retention of title has been 
expressly agreed between the debtor and the creditor before the delivery of the goods.  

1. 

2. 

1. 

2. 

3. 

1. 

2. 

3. 

4. 

5. 

Article 11 
Transparency 

Member  States  shall  ensure  transparency  regarding  the  rights  and  obligations  laid 
down in this Regulation, including by making publicly available the applicable rate 
of interest for late payment. 

The  Commission  shall  make  publicly  available  on  the  internet  the  current  rates  of 
interest for late payment which apply in the Member States. 

Article 12 
Recovery procedures for unchallenged claims 

Creditors shall obtain an enforceable title, including through an expedited procedure 
and irrespective of the amount of debt, within 90 calendar days of the lodging of the 
action or application at the court or other competent authority, provided that the debt 
and the procedure are not disputed.  

When calculating the period referred to in paragraph 1, the following period shall not 
be taken into account:  

(a) 

periods for service of documents; 

(b) 

any delays caused by the creditor.  

This  Article  shall  be  without  prejudice  to  the  provisions  of  Regulation  (EC) 
1896/2006. 

Article 13 
Enforcement authorities 

Each  Member  State  shall  designate  one  or  more  authorities  responsible  for  the 
enforcement of this Regulation (‘enforcement authority’). 

Where appropriate, enforcement authorities shall take measures necessary to ensure 
that the deadlines for payments are complied with.  

Enforcement  authorities  shall  cooperate  effectively  with  each  other  and  with  the 
Commission  and  shall  provide  each  other  with  mutual  assistance  in  investigations 
that have a cross-border dimension.  

Enforcement  authorities  shall  coordinate  their  activities  with  other  authorities 
responsible  for  enforcing  other  Union  or  national  legislation  including  through 
exchange of information obligations.  

Enforcement  authorities  shall  forward  the  complaints  received  regarding  late 
payments in the agricultural and food sector to the competent enforcement authorities 
under Directive (EU) 2019/633. 

EN 

22 

  EN 

 
Article 14 
Powers of enforcement authorities 

1. 

Enforcement authorities shall have the necessary resources and expertise to perform 
their duties, and shall have the following powers:  

(a) 

(b) 

(c) 

(d) 

(e) 

the power to initiate and conduct investigations on their own initiative or based 
on a complaint; 

the power to require creditors and debtors to provide all necessary information 
to conduct investigations related to late payments in commercial transactions; 

the power to carry out unannounced on-site inspections within the framework 
of their investigations; 

the  power  to  take  decisions  finding  an  infringement  of  this  Regulation  and 
requiring the debtor to pay interest for late payment as provided for in Article 5 
or requiring the debtor to compensate the creditor as provided for in Article 8; 

the  power  to  impose,  or  initiate  proceedings  for  the  imposition  of  fines  and 
other  penalties  and  interim  measures  on  the  subjects  responsible  for  the 
infringement; 

(f) 

the power to require the debtor to bring the infringement to an end; 

(g) 

the power to publish its decisions referred to in paragraphs (d), (e) and (f). 

Member States shall lay down the rules on penalties applicable to  infringements  of 
this  Regulation  and  shall  take  all  measures  necessary  to  ensure  that  they  are 
implemented.  The  penalties  provided  for  shall  be  effective,  proportionate  and 
dissuasive. 

Member  States  shall,  [by  …/without  delay],  notify  the  Commission  of  those  rules 
and  of  those  measures  and  shall  notify  it,  without  delay,  of  any  subsequent 
amendment affecting them. 

Article 15 
Complaints and confidentiality 

Creditors may address complaints either to the enforcement authority of the Member 
State  in  which  they  are  established  or  to  the  enforcement  authority  of  the  Member 
States  in  which  the  debtor  is  established.  The  enforcement  authority  to  which  the 
complaint is addressed shall be competent to enforce this Regulation.  

Organisations officially recognised as representing creditors or organisations with a 
legitimate  interest  in  representing  undertakings  shall  have  the  right  to  submit  a 
complaint  to  the  enforcement  authorities  referred  to  in  Article  13  at  the  request  of 
one or more of their members or, where appropriate, at  the  request  of one or more 
members  of  their  member  organisations,  where  those  members  consider  that  they 
have been affected by an infringement of this Regulation.  

Where  the  complainant  so  requests,  the  enforcement  authority  shall  take  the 
necessary measures for the appropriate protection of the identity of the complainant. 
The complainant shall identify any information for which it requests confidentiality.  

The enforcement authority that receives the complaint shall inform the complainant 
within a reasonable period of time after the receipt of the complaint of how it intends 
to follow up on the complaint.  

2. 

3. 

1. 

2. 

3. 

4. 

EN 

23 

  EN 

 
5. 

6. 

7. 

1. 

2. 

1. 

2. 

Where  an  enforcement  authority  considers  that  there  are  insufficient  grounds  for 
acting on a complaint, it shall inform the complainant of the reasons of its decision 
within a reasonable period of time after the receipt of the complaint.  

Where an enforcement authority considers that there are sufficient grounds for acting 
on  a  complaint,  it  shall  initiate,  conduct  and  conclude  an  investigation  of  the 
complaint within a reasonable period of time.  

Where an enforcement authority finds that a debtor has infringed this Regulation, it 
shall require the debtor to bring the illegal practice to an end.  

Article 16 
Alternative dispute resolution 

Without prejudice to the right of creditors to submit complaints under Article 15, and 
to the obligations and powers of enforcement authorities laid down in Articles 13, 14, 
and 15, Member States shall promote the voluntary use of effective and independent 
alternative  dispute  resolution  mechanisms  for  the  settlement  of  disputes  between 
debtors and creditors.  

Alternative dispute resolution mechanisms for late payment disputes shall encourage 
the parties to a dispute to find the solution by themselves and shall be fast, efficient, 
and cost-effective, while maintaining confidence and trust between the parties.  

Article 17 
Digital tools, credit management and financial literacy training 

To  the  extent  possible,  Member  States  shall  use  digital  tools  for  effective 
enforcement of this Regulation.  

Member  States  shall  ensure  that  credit  management  tools  and  financial  literacy 
trainings  are  available  and  accessible  to  small  and  medium  sized  enterprises, 
including on the use of digital tools for timely payments. 

Article 18 
Report 

By  [OP:  please  insert  the  date  =  4years  after  the  entry  into  force  of  this  Regulation],  the 
Commission shall submit a report on the implementation of this  Regulation to the European 
Parliament and the Council. 

Article 19 
Repeal  

Directive 2011/7/EU is repealed. 

References to the repealed Directive shall be construed as references to this Regulation. 

Article 20 
Entry into force and application 

1. 

This Regulation shall enter into force on the  day following that of its publication in 
the Official Journal of the European Union. 

EN 

24 

  EN 

 
2. 

3. 

It shall apply from [OP: please insert the date = 12 months after the date of entry into 
force of this Regulation].  

Commercial transactions carried out  after the date of application of this Regulation 
shall  be  subject  to  the  provisions  of  the  present  Regulation,  including  when  the 
underlying contract has been concluded before that date. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Strasbourg, 

For the European Parliament 
The President 

For the Council 
The President 

EN 

25 

  EN