How to calculate European statutory interest on overdue commercial debt

There is no single percentage that you can safely apply to every overdue invoice in Europe. Directive 2011/7/EU sets a common framework for commercial transactions, while the applicable rate and calculation details depend on the governing national law and the contract. This guide is limited to B2B invoices between businesses; transactions with public authorities and consumer invoices have separate rules.

Confirm that late interest is due

Under Article 3 of the Directive, a business creditor is entitled to late-payment interest without sending a reminder when it has met its contractual and legal obligations, the amount was not paid on time, and the debtor is responsible for the delay. The start date depends on the payment date fixed by the contract or, when no date is fixed, on the applicable statutory deadline. Do not start counting automatically from the invoice date.

First identify the governing law, the agreed payment term, the date the invoice or service was received where relevant, and any acceptance or verification period. Keep the contract, invoice and delivery evidence together so you can explain the date used in your calculation.

Find the rate for the right country and period

Article 2(6) defines statutory interest in the Directive as simple late-payment interest at the reference rate plus at least eight percentage points. The Directive defines the reference rate differently for euro and non-euro Member States. For a euro-area Member State, Article 2(7) identifies either the rate applied by the ECB to its most recent main refinancing operations or the marginal interest rate resulting from its most recent variable-rate tender procedures. For a non-euro Member State, it is the equivalent rate set by that country’s national central bank.

The Directive uses the reference rate in force on 1 January for the first half of the year and the rate in force on 1 July for the second half. National law can set a higher margin or other permitted conditions, and a valid contract clause may also matter. Check the national implementation for the country governing the invoice. The ECB’s official interest-rate table helps identify ECB rates, but it does not replace the national rule.

Calculate simple interest by period

Use the unpaid principal, the applicable annual rate and the number of days for which that rate applies. A general illustration is:

Interest = unpaid principal × annual rate × late days ÷ the year-day basis required by the applicable law or contract.

For example, if €10,000 is overdue for 30 days at a hypothetical annual rate of 10%, and the applicable calculation uses a 365-day year, the simple-interest illustration is €10,000 × 0.10 × 30 ÷ 365 = €82.19. The 10% is only a made-up example, not a current EU rate. The Directive calls for daily simple interest; the day-count convention and any national calculation rules still need to be checked.

If the late period crosses 1 January or 1 July, split the calculation at the date when the applicable reference rate changes. If the principal changes because of a partial payment, calculate each period using the balance then outstanding. Keep the assumptions and rounding method with the calculation.

Before you send a figure

• Confirm the country’s law and whether the debtor is a business or public authority.
• Check the contract for a payment date and an agreed interest clause.
• Verify the national rate for each relevant half-year from an official source.
• Count only the days for which the amount was legally overdue.
• Record the principal, day-count basis, rate periods and arithmetic.

For the wider EU payment framework, see the guide to the EU Late Payment Directive.