Late Payment Penalties

The general terms of sale must specify the application procedures and the interest rate for penalties incurred in case of late payment.

Late payment is defined as a payment made after the date mentioned on the invoice.

The interest rate stipulated in the general terms of sale cannot be less than three times the legal interest rate. However, businesses may set a higher interest rate, typically calculated on the total amount including taxes (TTC) of the invoice.

There are two rates, one for individual debtors and one for businesses. A decree outlines the calculation methods, updated semi-annually.

Example: For the second half of 2021, with the legal interest rate set at 0.79% for professionals, the calculation is as follows: 0.79% x 3 = 2.37%.

In the absence of mention in the general terms of sale, the reference rate is that applied by the European Central Bank (ECB) to its most recent refinancing operation, increased by 10 points.

Penalties are due without the need for any reminder. They automatically apply from the day following the payment deadline stated on the invoice or, failing that, the thirty-first day following the date of receipt of goods or the provision of services.

Additional Lump Sum Compensation for Collection Costs

Professionals must explicitly specify in their general terms of sale the amount of the lump sum compensation for collection costs.

This compensation is added to the late payment penalties invoiced to the professional debtor. Its amount has been fixed at a lump sum of €40 by the decree n°2012-1115 of October 2, 2012. If collection costs exceed the amount of the lump sum compensation, the creditor may, with supporting documents, request additional compensation.

This compensation is automatically due, meaning without the need for a reminder and from the first day of delay.

Caution! To be claimed, it must be mentioned in the general terms of sale and on invoices, just like late payment penalties. The absence of mention of this compensation may be subject to a fine of €15,000 for an individual and €75,000 for a legal entity.

However, this compensation cannot be claimed when insolvency proceedings, such as safeguard, reorganization, or judicial liquidation, have been initiated against the debtor and prohibit the payment of the debt.

Price Reductions

These include discounts, rebates, allowances, and discounts established based on specific and objective criteria. Price reductions can be quantitative (e.g., free products, price reductions) or qualitative (services offered incidentally to the sale of products). The seller must indicate, in the general terms of sale, the conditions, amount, and application procedures of price reductions.

The labeling given to each price reduction must be reflected in the invoice (only price reductions corresponding to other obligations mentioned in the 3rd paragraph of article L. 441-7, I, of the Commercial Code can be aggregated). This precise identification requirement should facilitate the detection of restrictive practices under article L. 442-6, I, 1º) and 2º) of the Commercial Code (false commercial cooperation and significant imbalance in the rights and obligations of the parties).

The seller must also include in these general terms of sale any one-time promotional discounts, as well as deferred year-end rebates.

Discount Conditions

Discount is a reduction granted to a buyer for early payment. The seller can grant a cash discount, which, if offered to all buyers, must be mentioned in the payment terms.

This reduction must also appear on invoices.