When are you allowed to charge statutory interest?

In the case of non-payment or late payment of invoices by debtors, there is the possibility of charging statutory interest. There is a distinction in the amount of statutory interest between companies/government agencies and consumers. Efficient debtor management aims to prevent debtor default and is an essential part of business operations for cash flow purposes. Payt provides a perfect system for managing and following up on debtors, but of course, default cannot always be ruled out. Therefore, it is good to know what statutory interest is and when you are allowed to calculate it.

What is statutory interest?

Statutory interest is the interest that a creditor can charge in the event of a payment delay. If an invoice is not paid within the payment term, the debtor is in default, and there is essentially a payment delay.

How high is the statutory interest?

For consumers, the statutory interest is 6% for non-commercial transactions, and for companies and governments, it is 12% for commercial transactions. The statutory interest can be adjusted every six months. However, it is advisable to check the current interest rates at the time of charging statutory interest.

Calculating statutory interest

Statutory interest is calculated on the outstanding amount of the invoice. It is not necessary to first send a reminder or formal notice to companies because the regulations arising from the law automatically come into effect. If the debtor is a consumer, it is required to receive a cost-free reminder first.

Payment term and statutory interest

It is good to know that there is also a distinction in the payment term for consumers, companies, and governments. For example, there is no statutory payment term for consumers, but there should be a reasonable payment term. The statutory payment term for companies is a maximum of 60 days, and for large companies it is 30 days. If companies have not agreed on a payment term, a statutory payment term of 30 days applies. Governments are required to pay invoices within 30 days of receipt.

Simple or compound statutory interest

When calculating statutory interest, in addition to choosing between consumer interest or commercial interest, another aspect is important. It depends on the situation whether simple or compound interest applies. Compound interest involves interest on interest and applies if the debtor has been in default for a year. In this case, it is allowed to add the statutory interest to the principal amount and then calculate the statutory interest on that total.

What is contractual interest?

Instead of charging statutory interest, it is also possible to charge contractual interest. Parties are free to determine the amount of contractual interest themselves, but there are limits. For example, the interest rate should not be in violation of good morals or public order. In that case, the provision for contractual interest may be considered void. As a result, the provision in the terms and conditions can be annulled if it is unreasonably burdensome.