In the fast-paced world of cross-border commerce, timely payments are vital for maintaining liquidity and trust. For businesses operating in or from Malta, understanding the legal framework surrounding interest on overdue payments is essential — especially when dealing with international debtors.
Malta transposed the EU Late Payments Directive (Directive 2011/7/EU) into national law via Legal Notice 272 of 2012, embedding it within the Commercial Code. This legislation applies to commercial transactions between businesses and public authorities, ensuring fair compensation for late payments.
Key Provisions:
- Interest Rate
- Creditors are entitled to simple interest at the European Central Bank (ECB) reference rate + 8%. As of 1 July 2025, this rate is 10.15%.
- Automatic Entitlement
- Interest accrues automatically—no reminder is required if the debtor is responsible for the delay.
- Recovery Costs
- Creditors can claim a minimum of €40 for recovery expenses, plus any additional reasonable costs.
Exceptions and Contractual Freedom
While the Civil Code generally limits interest rates, these restrictions do not apply to commercial transactions governed by the Directive. Businesses may negotiate terms freely, provided they are not grossly unfair to the creditor.
Examples of unfair terms include:
- Excluding interest or recovery costs in B2B contracts.
- Setting payment periods beyond 30 days in PA2B transactions
without valid exceptions.
Enforcement and Debt Recovery in Malta
Creditors can pursue overdue payments through executive titles under Articles 166A–170 of the Code of Organisation and Civil Procedure. Additionally, organisations like the Malta Association of Credit Management (MACM) offer support in debt recovery and credit management.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
