Interest for late payment is an institute widely used in commercial and civil law. The debtor must pay the creditor interest for late payment if it fails to pay its financial debt duly and on time, i.e. if it does not fully pay the debt by the due date.

The amount of statutory interest for late payment is determined in accordance with Government Regulation No. 142/1994 Coll. This regulation was amended, effective from 1 July 2013, by Government Regulation No. 180/2013 of 26 June 2013, which increased statutory interest for late payment by one percentage point per annum.

The amendment was adopted in connection with Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions. The directive requires Member States to lay down statutory interest for late payment at least eight percentage points above the reference rate of the European Central Bank or national central bank, depending on whether or not they are a member of the Eurozone. Under existing legislation however, interest for late payment was set according to the Czech National Bank (CNB) repo rate, increased by seven percentage points, which is less than required by the directive and it was therefore necessary to increase this percentage rate.

To calculate interest for late payment, the crucial factor is therefore the moment of default, as this is the basis on which the amount of interest will be determined. From 1 July 2013, the amount of interest for late payment per annum corresponds to the repo rate set by the CNB for the last day of the calendar half-year preceding the calendar half-year in which the default occurred, increased by eight percentage points. Interest for late payment does not change during the period of default in case of a change in the repo rate.

The repo rate as of 30 June 2013 was 0.05 %. Interest for late payment from 1 July 2013 is therefore 8.05 %, instead of the previous 7.05 %. However, interest at this rate can only be sought from debtors who defaulted on payment after 1 July 2013. Under the transitional provisions of the regulation, interest for late payment incurred prior to the effective date of this regulation is governed by previous legislation.

The CNB repo rate on a specific date can be found on the Czech National Bank’s official website on the following link:

http://www.cnb.cz/cs/faq/jak_se_vyvijela_dvoutydenni_repo_sazba_cnb.html

For more information, please contact K&A partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz; tel.: +420604242241