EU 30-Day Payment Cap: What CFOs Must Know

In September 2023, the European Commission published a proposal to replace the 2011 Late Payment Directive with a Regulation. The distinction matters. A Directive gives member states room to interpret. A Regulation applies directly, uniformly, across all 27 EU member states. No local opt-outs. No creative transposition.

The core proposal: a mandatory 30-day maximum payment term for all business-to-business and government-to-business commercial transactions. The current Directive allows 60 days by agreement and tolerates longer terms unless they are "grossly unfair" to the creditor. The Commission decided that standard was too vague and too easily abused.

The regulation would affect every company doing business in the EU, whether headquartered in Frankfurt or invoicing from outside the bloc. If you sell goods or services to an EU-based buyer, these rules would apply to your transaction.

The statistics are difficult to argue with. According to the European Commission, late payments cause one in four EU bankruptcies. The Commission estimates that more than 340,000 business failures annually are linked to overdue invoices. For SMEs operating on thin margins, a single large debtor paying 90 days late can trigger a chain of defaults that ends in insolvency.

The EU Payment Observatory confirmed in its 2024 and 2025 annual reports that average B2B payment periods exceed 60 days across the bloc. According to suppliers surveyed, government-to-business payments are even worse, with public authorities paying later than private buyers in every member state.

Country-level data paints a sharper picture. Italy averages roughly 86 days to settle commercial invoices. Greece sits at approximately 78 days. Portugal remains the only EU country where average payment delays exceed 20 days past the due date. Even Germany and the Netherlands, traditionally considered reliable payers, have seen payment performance slip in recent quarters.

The 2011 Directive was supposed to fix this. It did not. Compliance was uneven, enforcement was weak, and the "grossly unfair" standard gave large buyers enough ambiguity to impose payment terms that smaller suppliers could not realistically challenge.

Hard 30-Day Payment Cap

The Commission proposed eliminating contractual freedom on payment terms beyond 30 days. Under the current Directive, parties can agree to 60 days. Under the proposed Regulation, 30 days becomes the ceiling for all commercial transactions. No exceptions in the original Commission text.

Automatic and Compulsory Interest

This is arguably the most consequential provision. Under the proposal, interest on late payments becomes automatic. The rate: the European Central Bank reference rate plus 8 percentage points. Critically, the creditor cannot waive the right to claim this interest. That provision targets a well-documented problem where large buyers pressure suppliers to forgo interest claims as a condition of continued business.

Defined List of Unfair Payment Terms

The current Directive uses the concept of "grossly unfair" contract terms, which has proven nearly impossible to enforce consistently across 27 jurisdictions. The proposed Regulation replaces this with a defined list of specific unfair payment practices. This shift from a subjective standard to an objective checklist is designed to make enforcement predictable and litigation less necessary.

Mandatory Enforcement Authorities

Each member state would be required to designate a national enforcement authority with the power to investigate complaints, impose penalties, and publish findings. The current Directive has no such requirement, which partly explains why enforcement has been inconsistent.

Compensation for Recovery Costs

Beyond interest, the regulation provides for a minimum flat-fee compensation of EUR 50 for each late payment, plus reasonable recovery costs incurred by the creditor. This makes pursuing even smaller overdue amounts economically rational.

On 23 April 2024, the European Parliament adopted its first-reading position with significant amendments. MEPs voted to allow payment terms of up to 60 days if expressly agreed in the contract. For slow-moving or seasonal goods, terms could extend to 120 days. The Parliament position preserved the automatic interest mechanism but gave businesses more contractual flexibility than the Commission originally intended.

The Internal Market and Consumer Protection (IMCO) Committee had already signalled this direction in its March 2024 draft, reflecting intense lobbying from business associations concerned about the loss of contractual freedom. Eurochambres, representing European chambers of commerce, argued publicly that a rigid 30-day cap could create liquidity pressures for businesses that rely on longer payment cycles to manage cash flow.

After Parliament's vote, the proposal moved to the Council of the European Union. It did not advance. The Polish Presidency, which held the rotating Council chair in early 2025, reported that no compromise could be found among member states. The subsequent Danish Presidency declined to schedule further discussion. The legislative process effectively ended.

A coalition of Eurochambres and other business organisations issued a joint statement in March 2025 calling for a balanced approach that would address late payment without eliminating contractual flexibility. Studies cited during the debate estimated that forcing all European companies to pay within 30 days would require approximately EUR 2 trillion in additional financing to cover the resulting cash flow gaps.

But the stalling of the regulation does not mean the problem has been solved. The EU Payment Observatory's 2025 report confirmed that payment performance worsened in Italy, Greece, Spain, Poland, and several other member states throughout 2024. B2B and G2B payment periods remain stubbornly above 60 days. The conditions that prompted the Commission's proposal have not improved.

Whether this specific regulation is revived, rewritten, or permanently shelved, the regulatory direction is clear. The EU is moving toward shorter mandatory payment terms and stronger enforcement. France already enforces its own 60-day payment term law with substantial fines. Germany has proposed stricter domestic rules. Individual member states are not waiting for Brussels.

For companies with cross-border receivables in Europe, the practical implications are immediate: