Payment terms in Europe
What you need to know doing business in Europe
Payment terms in Europe are limited. To combat late payments, the European Union has imposed strict maximum terms for government institutions and companies. Government institutions are not allowed to deviate from these rules. Companies are allowed to agree different terms, unless well sustained and specifically agreed to in writing but still no more than 90 days in total.
With Directive 2011/7/EU the EU has set the goal to decrease arrears in payment. This directive clarifies for all member states when and how much interest and (collection) costs, can be charged. Next to that the directive restricts the length of payment terms. Payment terms in Europe were abused and seen as a cheap credit facility. This created distortion of competition as the “big boys” could easily enforce unreasonable long payment terms with their smaller deliverers. The EU intended to put an end to that practices with this directive.
Which are the payment terms in Europe?
Payment terms in Europe for companies
The payment terms in Europe for companies in the mentioned directive (Art. 3 section 3 sub b under I-IV Directive 2011/7/EU) are in direct correlation with the moment from which it is possible to charge interest. Underneath the rules:
- If no payment term is agreed to in the contract (or General Terms & Conditions):
- 30 calendar days after receipt of the invoice
- if date of receipt of invoice is not determined than 30 calendar days after receipt of goods and/or services
- if the invoice is received before the goods and/or services than 30 calendar days after receipt of the goods and/or services
- if a verification or acceptance procedure is agreed to with regard to conformity than 30 calendar days after the date that procedure is completed
- a verification or acceptance procedure may not take longer than 30 calendar days
- Payment terms in Europe that are set in a contract are not allowed to take any longer than 60 calendar days unless otherwise expressly agreed. The agreed term can not be grossly unfair to the creditor
Payment terms in Europe for public authorities
With government institutions, big and small, the maximum payment term in Europe is not allowed to exceed 30 calendar days after receipt of invoice (Art. 4 section 3 Directive 2011/7/EU).
The only two exception to this rule are public authorities that are subject to the transparency requirements of Directive 2006/111/EC and public authorities that provide healthcare such as hospitals. With these entities a payment term is allowed of max 60 calendar days.
A government institution or public authority is automatically in arrear if the above mentioned payment term has passed. Interest and possible costs can than be immediately charged. If it is wise to do this is a matter of commercial deliberation.
- Make sure your payment terms are always clear and in writing.
- Make sure and make possible to proof that your buyer was proactively informed by you, of your payment terms.
- Make sure that you know and can proof that your buyer knows the language the contract was in as well as the possible payment and general conditions.
- Check the documents you receive from your buyer thoroughly; if there are any references to other general terms & condition deny explicitly their applicability in writing.
Do you wish to sell your goods and services in Europe? We are glad to be at your disposal with free advice. Get in contact for non-binding conversation and information.
Send an e-mail to email@example.com or call +44 (0)20 71389075 or +31 (0)20 4090400
 Directive 2011/7/EU of the European Parliament and the Council of 16 February 2011 on combating late payment in commercial transactions (recast)