Question 1A – To what transactions does this Directive apply?


Answer 1A – It applies to payments made as remuneration for commercial transactions carried out between private and public undertakings, between undertakings and public authorities, and between main contractors and their suppliers and subcontractors, as from 1st March, 2012.


Question 1B – If a contract bearing longer credit terms was signed with a public authority after 1st March 2012 but before 14th August 2012 (date of transposition), how is such contract regulated?


Answer 1B – These contracts are subject to revision as the law applies retroactively up to 1st March 2012.


Question 2A – What constitutes a public authority?


Answer 2A – “Public authority” means the Government of Malta, the Local Councils or bodies governed by public law, associations formed by one or several of such authorities or bodies governed by public law. For the purpose of this definition, “a body governed by public law” means a body which:


(a) is established for the specific purpose of meeting needs in the general interest, not being of an industrial or commercial nature;
(b) has legal personality; and
(c) is financed for the most part by the State, or Local Councils or other public bodies, or is subject to management supervision by those bodies, or has an administrative, managerial or supervisory board more than half of whose members are appointed by the State, Local Councils, or other public bodies.


Question 2B – How can I make sure if a particular entity is a public authority or otherwise?


Answer 2B – The definition given to “public authorities” by this directive is the same as the one used to identify “contracting authorities” as defined by the Public Procurement Regulations. Schedule 1 in these Regulations contains the list of contracting authorities and can be accessed online, specifically on:


Question 3A – What are the main changes that this recast directive has introduced which were not included in the already transposed Directive 2000/35/EC ?


Answer 3A – The three main changes are:


(a) In PA2B transactions there is harmonisation of payment period.
(b) Public authorities are not allowed to fix an interest rate for late payment below the established one of 8% plus the ECB intervention rate.
(c) Enterprises will automatically be entitled to claim interest for late payment and will also be able to obtain a minimum fixed amount of €40 as compensation for recovery cost.


Question 3B – In this regard what is the payment period established for PA2B transactions?


Answer 3B – In principle this is established as follows:


(a) Public authorities will have to pay for the goods and services that they procure within 30 calendar days following the receipt of invoice;
(b) When such date (receipt of invoice) is uncertain, payment is to be made 30 days after the date of receipt of the goods/services;
(c) If however acceptance procedures are included in the contract, then payment is to be made 30 days after that date.


Question 3C – But are there any specific exceptions to which the 30 day rule does not apply?


Answer 3C – Yes, in case of the following two exceptions the time period has been extended to sixty days:


(a) any public authority which carries out economic activities of an industrial or commercial nature by offering goods or services on the market and which is subject as a public undertaking to the transparency requirements laid down in Commission Directive 2006/111/EC; and


(b) public entities providing health care which are duly recognized for that purpose.


Questions 4A – Can a business choose not to abide by the payment period and interest rate indicated by the Directive during a B2B transaction?


Answer 4A – Yes, so long as the extension of time and the interest rate agreed is not grossly unfair to the creditor.


Question 4B – But what considered to be ‘grossly unfair to the creditor’?


Answer 4B – In a B2B transaction any contractual clause that excludes interest for late payment or compensation for recovery cost is considered grossly unfair. On the other hand if the transaction is PA2B in nature, any contractual clause with a payment period that exceeds 30 calendar days (and which is not covered by the exceptional derogations), that excludes interest for late payment or is set below the statutory interest rate, or that excludes compensation for recovery cost is deemed grossly unfair.


Question 5 – What are the recovery procedures that I (as the creditor) should follow in order to claim my right for late payment interest and compensation for recovery cost?


Answer 5 – In respect of claims for late payment, where the amount of the debt or other aspects of the proceedings are not disputed, an executive title may be obtained by the creditor in accordance with the provisions of article 166A to article 170 (inclusive) of the Code of Organisation and Civil Procedure , subject to the conditions laid down in those articles.


Question 6A – In order to make sure that the rate of interest for late payment included in my agreement with a public authority is correct, where can I refer to?


Answer 6A – The applicable legal interest rate can be found online on


Question 6B – Where can I find a copy of the legislation?


Answer 6B – This directive has been transposed in the Commercial Code through LN 272 of 2012.


Question 7 – Are payment by installments allowed?


Answer 7 – Installments are allowed, however any instalments have to be paid according to the rules established by the directive and as transposed in the Commercial Code.


Question 8 – Who retains title of the goods until payment has been effected in full?


Answer 8 – The seller retains title to goods until they are fully paid for if a ‘retention of title clause’ has been expressly agreed between the buyer and the seller before the delivery of the goods.


Question 9A: Are there are any national bodies (affiliated debt collection agencies/bailiffs) that may be able to help the recovery of debts (late payment)?


Answer 9A: There are no national bodies which are government entities for this purpose. However, in Malta there is the MACM, the Malta Association of Credit Management (MACM), that is a not-for-profit organization, providing a central national organisation for the promotion and protection of all credit interest pertaining to Maltese businesses.


MACM represents the credit profession across all economic sectors. It is a centre of expertise for all matters relating to credit management in Malta. MACM offers a range of services to the local creditors, including, credit management information systems, credit management education, training, conferences, seminars, and lobbying activities. It is the CICM (UK) accredited Training Centre for Malta. MACM is a member of the Federation of European Credit Management Associations – FECMA. Among these roles, it is also accessible to aid with the recovery of debts if approached to do so by one of its members.


Question 9B: Whether there is any additional compensation that can be claimed, such as a percentage of the value of the invoice, administrative costs, debt collection fees or costs to instruct a lawyer?


Answer 9B: Article 26E of the Commercial Code states that:


In addition to the claim for late payment under this Sub-Title, a creditor is entitled to recover from the debtor, without the need of a reminder:


(a) a minimum of forty euro (€40) as compensation for the creditor’s own recovery costs; and


(b) such other reasonable sum in excess of the forty euro(€40) incurred by him due to the debtor’s late payment.


Performance and Evaluation Directorate
Budgetary Affairs Division


18th September 2020


Related pages:

Late Payments