Late Payments Regulation Explainer
Combating Late Payment in Commercial Transactions
The European Commission's proposal to replace Directive 2011/7/EU with a directly applicable Regulation. Stricter payment deadlines, automatic penalties, and independent enforcement authorities to protect SMEs.
Why the Commission proposed replacing the 2011 Directive with a Regulation
Thousands of small and medium-sized enterprises go bankrupt every year waiting for their invoices to be paid. Late payments are the single biggest cause of cash flow problems for SMEs, and the 2011 Directive has failed to solve the problem because Member States implemented it inconsistently and enforcement was weak.
COM(2023)533, published 12 September 2023. Part of the SME Relief Package.
Roza Thun und Hohenstein (Renew, Poland) tabled the IMCO draft report (PE756.002) on 14 November 2023
The rapporteur broadly supported the Commission's proposal but introduced key modifications to balance SME protection with business flexibility. Her main contributions were: introducing payment flexibility up to 60 days for B2B when mutually agreed; requiring enforcement authorities to be independent from public procurement bodies; adding a retail sector exemption for slow-moving and seasonal goods; and creating a public reporting framework for contracting authorities' payment practices.
While keeping the 30-day default, the rapporteur proposed allowing B2B payment terms of up to 60 days when expressly agreed between parties. This was the single most significant departure from the Commission text, which allowed no flexibility.
The rapporteur insisted that enforcement authorities must be independent from other public authorities, including those involved in public procurement procedures. This was designed to prevent conflicts of interest when public authorities are themselves late payers.
Extended payment terms of up to 120 days proposed for the retail sector dealing in slow-moving or seasonal goods. This recognised the specific cash flow dynamics of retail supply chains.
Contracting authorities should report annually on their payment practices, categorising payments into intervals (1-30, 31-60, 61-90, 90+ days) and reporting average payment time. Reports must be submitted to enforcement authorities and be publicly accessible.
405 amendments tabled (PE757.130: amendments 26-223; PE757.363: amendments 224-405)
IMCO members tabled 405 amendments to the rapporteur's draft report, reflecting deep divisions on the balance between SME protection and contractual freedom. The key battleground was the maximum payment period: the Commission wanted a strict 30-day limit with no exceptions, the rapporteur proposed 60-day B2B flexibility, and several MEPs pushed for even greater flexibility or sector-specific carve-outs.
Multiple amendments sought to modify the payment deadline framework. Some MEPs backed the Commission's strict 30-day limit, arguing that any flexibility would be exploited by large companies at the expense of SMEs. Others pushed for broader exemptions, including 90-day terms for specific industries like construction and agriculture.
Amendment 51 removed the "without the necessity of a reminder" language for flat fee compensation. The adopted text requires that compensation is payable automatically but does not require the debtor to pay without being asked. Restrictions were added on waiving rights when the debtor is a public authority or large undertaking.
Enforcement authorities must be independent from other public authorities, including those involved in public procurement procedures. This was explicitly added to prevent conflicts of interest, since public authorities are often themselves late payers.
Enforcement authorities shall take "proportionate" measures (word added) to ensure payment deadlines are complied with. This was designed to prevent overly aggressive enforcement that could disrupt business relationships.
Enforcement authorities must make publicly available aggregated information on the number of complaints lodged against undertakings and public authorities for violations of Article 3 (payment deadlines).
Micro-undertakings (fewer than 10 employees) receive a 12-month additional grace period as debtors, recognising their particular vulnerability to sudden regulatory changes in payment practices.
T9-0299/2024, adopted 23 April 2024. IMCO vote: 33 for, 10 against, 2 abstentions.
The European Parliament adopted its first reading position on 23 April 2024, incorporating the rapporteur's key modifications and several committee amendments. The text maintains the 30-day default but adds significant flexibility for B2B relationships, sector-specific accommodations, and stronger enforcement safeguards. It was adopted with a comfortable majority (33-10-2 in committee), though opposition reflects industry concerns about contractual freedom.
Commission proposal vs. EP adopted text vs. current Directive 2011/7/EU
| Provision | Directive 2011/7/EU (current) | COM(2023)533 (Commission) | T9-0299/2024 (EP adopted) |
|---|---|---|---|
| Instrument type | Directive (requires transposition) | Regulation (direct effect) | Regulation (direct effect) |
| B2B payment deadline | 60 days (unless otherwise agreed) | 30 days (no flexibility) | 30 days default, 60 days if agreed |
| G2B payment deadline | 30 days (exceptionally 60) | 30 days | 30 days |
| Retail exception | None | None | Up to 120 days (seasonal goods) |
| Flat fee compensation | Minimum EUR 40 | EUR 50/100/150 (tiered) | EUR 50/100/150 (tiered) |
| Compensation trigger | Manual (creditor must claim) | Automatic (no reminder needed) | Automatic (reminder provision softened) |
| Enforcement | No dedicated body required | National authorities required | Independent authorities required |
| Expedited title | Not specified | 90 calendar days | 60 calendar days |
| Public reporting | None | Limited | Contracting authorities must report annually |
| Micro-enterprise protection | None | None | 12-month grace period as debtors |
| Insurance payments | Unclear | Excluded | Included |
| Digital tools | Not mentioned | Not mentioned | Article 17: digital enforcement + training |
Industry, SME associations, and professional bodies have taken strong positions
In a joint statement (March 2025), these three major business federations called on the Commission to withdraw the proposal entirely. Their concerns:
ICISA reports that while limited support was expressed for stricter regulation, many bodies representing corporates called for greater flexibility and a rethink. The Parliament's version softened some proposals but "ultimately maintained the weakening of contractual freedom." Member states expressed concern about interaction with existing national regimes.
In their factsheet, AccountancyEurope provides a balanced analysis. The Regulation is expected to have a big impact on SMEs: improved liquidity, less administrative burden from chasing payments, and a level playing field. However, they note that SMEs as debtors must also ensure they can pay within the 30-day period, which has significant balance sheet implications.
The European Economic and Social Committee (CES3705/2023, 17 January 2024) and the Committee of the Regions (CDR4941/2023, 31 January 2024) both provided opinions on the proposal. These advisory bodies generally supported the objective of combating late payments while raising concerns about implementation challenges for smaller public authorities.
A majority of Member States oppose the proposal
After the European Parliament adopted its first reading position in April 2024, the proposal moved to the Council. However, a majority of Member States have expressed opposition through a non-paper dated 7 June 2024. Their key concerns mirror industry positions:
No general approach or Presidency compromise text has been published. The file is effectively stalled, and BusinessEurope, Eurochambres, and EuroCommerce have called for the Commission to withdraw the proposal entirely.
| Role | Name | Group / Institution |
|---|---|---|
| Current rapporteur | Ivars Ijabs | Renew, Latvia (IMCO) |
| Previous rapporteur | Roza Thun und Hohenstein | Renew, Poland (IMCO) |
| Shadow (EPP) | Regina Doherty | EPP, Ireland |
| Shadow (S&D) | Tsvetelina Penkova | S&D, Bulgaria |
| Shadow (PfE) | Jorge Martin Frias | PfE, Spain |
| Shadow (ECR) | Reinis Poznjaks | ECR, Latvia |
| Shadow (Greens) | Reinier van Lanschot | Greens/EFA, Netherlands |
| Original Commissioner | Thierry Breton | DG GROW |
| Responsible DG | DG GROW | Internal Market, Industry, Entrepreneurship and SMEs |
All documents referenced in this analysis