Glossary
Late payment interest
Short answer
Late payment interest is the amount charged on overdue payments from the due date until payment, set either by the contract or by statute where the contract is silent. In the EU, Directive 2011/7/EU sets statutory interest at the reference rate plus at least 8 percentage points for commercial transactions.
By Pactinel editorial teamReviewed on October 22, 2026
Many contracts set their own rate, for example "1.5% per month" or "the base rate plus 4%". Where they do not, many legal systems provide a default.
EU rule
Directive 2011/7/EU on combating late payment in commercial transactions provides, for business-to-business transactions, a default payment period of 30 days, statutory interest at the reference rate plus at least 8 percentage points, and a minimum fixed compensation of EUR 40 for recovery costs. Member states implement it in national law, and contractual terms that are grossly unfair to the creditor may be challenged.
Example calculation
An invoice of EUR 10,000 is 45 days overdue. Assume, for illustration only, an annual rate of 10%.
Interest = 10,000 × 10% × 45 ÷ 365 = EUR 123.29
Plus any fixed compensation or recovery costs the contract or law allows.
What to track
- Payment due date and any grace period.
- The rate or formula, and whether it is simple or compounded.
- Whether late interest is a right or only a remedy for the supplier.
- Caps on interest in the contract or in national law.
Rules differ by country and by consumer or business status. This is general information, not legal advice.