MEPs approve measures to tackle late payments and support SMEs  

Press Releases 
  • Payments would have to be made in 30 days, with limited exceptions 
  • Almost 50% of the invoices in the EU are not paid on time  
  • SMEs, which make up 99% of EU businesses, disproportionally affected by late payments 
  • Shift in culture needed to reverse trend and discourage late payments 

The delays in commercial transactions not only compromise the cash flow of SMEs but also hamper the competitiveness and resilience of the entire supply chain.

On Wednesday, the Committee on Internal Market and Consumer Protection adopted its position on the regulation on combating late payments. The draft rules aim to improve the payment discipline of all actors (large companies, SMEs and public authorities) and to boost the competitiveness of companies, in particular SMEs.

Improving the payment culture and freedom of contract

The draft regulation introduces a series of robust measures designed to eliminate ambiguities and legal gaps that have limited the effectiveness of the current Directive on late payments.

The draft text puts in place a stricter maximum payment term of 30 in both business- to-business (B2B) and government-to-business (G2B) transactions (where the public authority is the debtor), aiming to standardise timely payments among companies and public authorities. MEPs want to ensure companies have flexibility to negotiate payment terms of up to 60 calendar days in B2B transactions, as long as it is expressly agreed in the contract.

Recognising that the specific business models and practices in the retail sector often require longer payment periods due to factors like low product turnover, seasonality or unique cycles for items (e.g. toys, jewellery, sporting equipment or books), MEPs propose allowing for payment terms of up to 120 days in these cases. To maintain consistency in payments practices across the single market, the Commission is expected to issue guidelines on the application of these rules to the specified product categories.

Compensation fees

In order to protect companies, particularly SMEs, against bad payers and ensuring the timely receipt of payments to avoid cash flow disruptions, the adopted text puts in place an automatic payment of accrued interest and compensation fees for late payments. MEPs agreed that the debtor would owe between 50 and 150 euro for each transaction (depending on the value) to compensate for the creditor’s own recovery costs.

Strengthening redress mechanisms

The proposal introduces new enforcement, redress and awareness-raising measures. It also encourages the use of e-tools to help shorten delays and financial literacy trainings for SMEs.

Once a year, contracting authorities (e.g. government entities) would have to submit publicly accessible reports on their payment practices to the national enforcement authority. A European Observatory of Late Payment would also be set up to monitor, collect and share data on late payments and potential harmful practices.


Rapporteur Róża Thun Und Hohenstein (Renew, PL) said “Unreliable cash flows can jeopardize SMEs and micro-enterprises, limiting growth, innovation and EU’s competitiveness. With this regulation, we are not only protecting the smaller companies, which are the backbone of our economy, but above all, we introduce predictability and fairness for all European companies. It is a major push towards fostering a better payment culture, beneficial for the entire European economy”.

Next steps

The draft report, which was adopted with 33 votes in favour, 10 against and 2 abstentions, will now be put to a vote at 22-25 April plenary session and will constitute Parliament’s position at first reading. The file will be followed up by the new Parliament after the European elections on 6-9 June.


Late payments (made outside the agreed or legal term) affect all member states and business sectors, especially SMEs. One of the principal causes of late payments is the imbalance in bargaining power between a large or more powerful client (debtor) and a smaller supplier (creditor), forcing the latter to accept unfair payment terms. They lead to an increased risk to bankruptcy, uncertainty in business planning and budgeting, and reduced participation in public procurement.

The revision of the Late Payment Directive seeks to improve payment discipline among all parties and protect companies from the adverse impacts of payment delays. This initiative is part of a broader effort to bolster Europe's SMEs, which make up 99% of all businesses and account for two-thirds of private sector jobs.