Payment Terms Legislation In European Union

The EU Late Payment Directive of 16 Feb 2011 required member states to implement laws by 16 Mar 2013. Maximum payment terms from public entities are 30 days. For specific situations longer terms can be agreed in contract, but this cannot exceed 60 days particularly for the healthcare sector. Commercial terms cannot be longer than 60 days unless expressly agreed by both parties and not grossly unfair. Where no terms are specified the default is 30 days. The term begins from receipt of invoice and verification of invoice cannot exceed 30 days. If the invoice is not received or received earlier than receipt of goods then the term starts from receipt of goods. Individual states can enact provisions that are more favourable to the supplier (See EU member states for local details).

On 30 April 2019 the EU adopted legislation on unfair trading practices in business-to-business relationships in the food supply chain. Member states were required to transpose the directive into national law by 1 May 2021. Among other requirements, payment terms are capped at 30 days for perishable goods and 60 days for other agricultural and food products, from the later of delivery date or payment due date. Healthcare, school food schemes, and long-term grape contracts are excluded and five tiers of relative company sizes are set out to which these terms apply. Existing contracts have one year to comply. A stricter enforcement mechanism is also required in each member state with a designated enforcement authority. (See EU member states for local details).

The Supply Chain Initiative (SCI) is a joint initiative launched by several EU level associations with the aim of increasing fairness in commercial relations along the food supply chain.

The Australian government policy RMG 417 requires all non-corporate commonwealth entities with compliant e-invoicing capabilities to pay e-invoices within 5 days and all other other small supplier invoices within 20 days, regardless of the size of invoice.

The Australian Small Business and Family Enterprise Ombudsman has investigated commercial payment terms to SMEs and proposed a 30 day maximum term. No law has yet been proposed, rather reporting requirements have been introduced.