The EU Commissioner for Agriculture, Janusz Wojciechowski, has said that farmers will benefit from a proposed EU regulation on late payments.
The EU Commission proposal aims to combat the problem of late payments in commercial transactions in Europe.
The new Late Payment Regulation hopes to “bring fairness to commercial transactions, increase the resilience of small and medium enterprises (SMEs) and supply chains”.
It also aims to foster a more widespread use of digital technology and improve the financial literacy of entrepreneurs.
Late payments
The EU Commission said that one of the main causes of late payments is a lack of equality in the bargaining power between a large or more powerful client and a smaller supplier.
This often results in suppliers having to accept unfair payment terms and conditions.
In the EU, on average, one in two invoices in commercial transactions are paid late or not at all.
The existing EU directive on this issue lays down a payment term of 30 days in business-to-business transactions. This can be extended to 60 days or more “if not grossly unfair to the creditor”.
However, the ambiguity in the directive has resulted in payment terms of 120 days or more being often imposed on smaller creditors.
The new proposal would streamline the current provision and introduce a single maximum payment term of 30 calendar days for all commercial transactions.
The same payment period shall also apply to the supply of non-perishable agricultural and food products.
EU Agriculture Commissioner Janusz Wojciechowski said that the proposed regulation would build on the foundation laid by the EU directive on unfair trading practices (UTP) in the agricultural and food supply chain.
“The proposed Late Payment Regulation ensures that all farmers will receive their payments within a maximum of 30 days, plus automatic interest rates and a flat fee compensation of €50 for late payments,” he said in a social media post.
Under the proposed regulation, SMEs will be equipped with “the tools to defend their rights” when paid late through enforcement and redress mechanisms.
The EU Commission said this will reduce the “fear factor” that has hampered the implementation of the current directive.
If the proposal receives approved from both the EU Parliament and the EU Council, the new rules would become applicable one year after the regulation enters into force.