Interest on late payment for commercial transactions
Luxembourg law on late payments for commercial transactions is currently governed by the Law of 29 March 2013, which transposed EU Directive 2011/7/EU.
This legislation replaced the previous framework established by the Law of 18 April 2004 and introduced stricter measures to curb late payments in business-to-business relations as well as in transactions involving public authorities.
The overarching goal of the new law is to reduce excessive payment delays and protect creditors against unfair contractual practices.
The Law of 29 March 2013 applies to commercial transactions, meaning the supply of goods or services for remuneration between businesses (B2B) or between businesses and public authorities.
Consumer-related transactions (B2C) remain subject to older Luxembourg legislation, including the Laws of 23 June 1909 and 22 February 1984. Since these involve end-consumers, they follow a separate set of rules and deadlines. Accordingly, different statutory interest rates and deadlines may apply. These older laws also grant specific safeguards for consumers, making it important to verify the current decrees and regulations that set annual or semi-annual rates when dealing with B2C transactions.
Under the current regime, payments in commercial transactions are generally due within 30 days of receiving the invoice, the goods, or the rendered service.
The law allows parties to agree on a different deadline, provided it is formalized in writing and does not place an unfair burden on the creditor.
In the case of public authorities, the default payment period is usually 30 days, although certain specific sectors may allow for an extended period of up to 60 days.
Once the due date has passed or 30 days have elapsed, interest on the outstanding amount accrues automatically without any requirement for a prior notice.
The statutory interest rate is based on the European Central Bank’s (ECB) reference rate, to which an 8% margin is added1. This margin was increased from the previous 7% to reinforce deterrence against late payments.
The precise rate is published periodically in the official journal (Recueil de législation / Mémorial) and should be verified for accuracy whenever a default situation arises.
The creditor is entitled by law to a flat-rate compensation for recovery costs, set at a minimum of EUR 40, which becomes payable as soon as the debtor is in default.
In addition, the law allows creditors to claim other reasonable recovery costs if they exceed the standard amount of EUR 40, ensuring that the injured party does not bear additional expenses resulting from the debtor’s delay.
In light of the current rules, businesses are advised to review their invoice and include a clear statement referencing the Law of 29 March 2013 as: “pursuant to Luxembourg's law of 18 April 2004, a failure to settle accounts on time carries a rate of interest equal to the key ECB interest rate plus 8%, with a fixed minimum of EUR 40 for recovery costs.”
By adopting the Law of 29 March 2013, Luxembourg reinforced its legal framework against late payments in commercial transactions and aligned it with EU Directive 2011/7/EU.
The new rules tightened payment deadlines, increased the interest margin above the ECB reference rate, and guaranteed creditors an automatic right to collect a flat compensation for recovery costs.
1. In the second semester of 2024, this rate was 12.25%.
_comp.jpg)
