SMEs vs big companies: payment term maximum 60 days

Between companies, a legal payment term of 30 days applies. Parties can agree to derogate. Big companies often obtain (some say enforce) longer payment terms. But as from 29 April 2020, there is a maximum of 60 days.

SME vs big company

The new law foresees in a maximum payment term of 60 days. This has three consequences:

The standard payment term for commercial transactions remains 30 days, as it was in the past. If you do not make special arrangements, the debtor has to pay within 30 days.

As it was the case in the past, companies can agree on other payment terms unlimited.

Only in the situation whereby the creditor is an SME and the debtor a big company, the agreed payment term cannot be longer than 60 days.

Summarized

Creditor = SME:

Debtor = SME => according agreement (or 30 days)

Debtor = big company => according agreement (max. 60 days) (or 30 days)

Creditor = big company:

Debtor = SME => according agreement (or 30 days)

Debtor = big company => according agreement (or 30 days)

SME

The payment term starts on the date when de debtor receives the invoice. If this date is not clear, the term starts at the moment of the supply. The 60 days limitation only applies when the creditor is an SME and the debtor a big company. We should look at the corporate legislation in order to determine whether the parties meet the requirements for one or the other qualification.

A company is considered an SME when it does not exceed more than one of the following criteria:

An average (annual) maximum of 50 employees

Maximum annual turnover (ex VAT) of 9.000.000 euro

Maximum total balance sheet of 4.500.000 euro

A company exceeding 2 or 3 of these criteria is considered a big company.

It should be judged at the time of the closing of the agreement whether these criteria are exceeded. If 1 criterion is exceeded after the contract was closed, this will not impact the application of the maximum 60 days' period.

Sanction

If the 60 days' limit is not respected, the clause is considered non-existent. The legal payment term will then apply. This term is 30 days. In principle interest will be due afterwards.

The government

In general, if the government is your debtor, also the 30 days' term applies. You can agree on another payment term, but also here the 60 days' maximum applies.

As from when?

The law introducing this maximum dates from May 2019, but the new rules become applicable on 29 April 2020.