Suppliers can for the next six months charge 8.05 per cent interest if their invoices for commercial transactions are not settled within 30 days.

The European Commission Directive 2011/7/EU on combating late payment in commercial transactions was transposed in Maltese law in 2012, with the interest rate being reviewed every six months on January 1 and July 1.

Suppliers are entitled to eight per cent plus the ECB intervention rate – 8.05 per cent for the current period – and are also eligible to claim a minimum of €40 to compensate for the expenses incurred to recover past-due money from the trade customer.

The late payment charge applies to business-to-business transactions, as well as to transactions with public authorities.

Although the parties can agree between themselves to extend the credit period, the legal notice stipulates that this cannot exceed 60 calendar days.

The Malta Association of Credit Management pointed out that the directive also obliges member states to ensure that an enforceable title will be obtained, irrespective of the amount of the debt, within 90 calendar days of the lodging of the creditor’s action or application at the court.

Although the indicator for credit management – the average time taken by customers in settling their invoices due to their suppliers – has improved, from 90.93 days in 2013 to 83.50 in December 2014, this is clearly a long way from 30 days, and the MACM does not expect dramatic improvements in the survey for 2015 due to be released shortly.

“A report issued by the European Commission referred to late payment as the major cause of business insolvencies, threatening the survival of businesses and resulting in numerous job losses.

“The Commission’s report on late payment and its consequences clearly noted that the public authorities are not leading by example and are paying their suppliers remarkably late: ‘Late payments by public administrations undermines the credibility of policies and contradicts declared policy objectives to provide for stable and predictable operating conditions for enterprises and foster growth and employment’,” MACM director general Josef Busuttil said.

“It also said public authorities do not face the same financing constraints as businesses so late payment in their case was avoidable and should therefore be more severely sanctioned when it occurs.”