Late payment interest and penalties
calculation and rights in 2026

Your professional client is not paying on time? French law provides a precise set of protections: daily late-payment interest, an automatic 40-euro flat-rate indemnity, and the ability to claim additional recovery costs. This guide covers the legal framework, calculation formulas with worked examples, mandatory invoice mentions, and the practical steps to assert your rights.

1. The legal framework: Article L441-10 of the Code de commerce

The late payment penalty regime between businesses is governed by Article L441-10 of the French Commercial Code (Code de commerce), stemming from the Economic Modernisation Act (LME) of 4 August 2008, amended several times since. This provision establishes three fundamental principles:

• Maximum payment term: 60 days from the invoice date, or 45 days end-of-month (at the parties' discretion, provided the contract specifies). Any longer term is illegal and exposes the debtor to administrative penalties of up to 2 million euros for a legal entity.
• Automatic late payment penalties: penalties are owed by operation of law (de plein droit), without any reminder or formal notice being necessary. They accrue from the day after the invoice due date.
• Fixed recovery indemnity: a flat 40-euro indemnity is owed automatically for every invoice paid late, with no supporting evidence required.

This regime applies only to business-to-business (B2B) transactions. Transactions with individuals (B2C) fall under the Civil Code and the Consumer Code, with different rules (statutory interest rate, no automatic 40-euro indemnity).

2. The late payment interest rate

Article L441-10 sets a floor: the late payment interest rate may not be lower than 3 times the legal interest rate. In practice, most businesses apply the statutory minimum, which is 3 times the European Central Bank refinancing rate in force on 1 January or 1 July of the relevant calendar year.

You are free to set a rate above the legal minimum in your general terms and conditions of sale. A rate of 12% or 15% is common and perfectly legal. However, a manifestly excessive rate could be challenged as abusive, although no express statutory cap exists.

3. Formula for calculating late payment interest

The formula for calculating late payment penalties is as follows:

The calculation is based on the amount excluding VAT (HT), not the amount including VAT (TTC). The number of days late runs from the day after the due date until the day of actual payment (date of receipt of funds, not the date the transfer was initiated).

Example 1: service provision

A freelance graphic designer issued an invoice for 3,000 euros excl. VAT on 1 February 2026, with a 30-day payment term (due 3 March 2026). The client pays on 2 April 2026, i.e. 30 days late.

• Rate applied: 10.35% (2026 legal minimum)
• Penalties: 3,000 x (10.35% / 365) x 30 = 25.52 euros
• Fixed recovery indemnity: 40 euros
• Total owed on top of the invoice: 65.52 euros

Example 2: large invoice with long delay

A consultant invoices 12,000 euros excl. VAT with a due date of 15 January 2026. The client pays on 15 April 2026, i.e. 90 days late.

• Rate applied: 12% (contractual rate set in T&Cs)
• Penalties: 12,000 x (12% / 365) x 90 = 354.25 euros
• Fixed recovery indemnity: 40 euros
• Total owed on top of the invoice: 394.25 euros

Example 3: multiple overdue invoices

If a single client has 3 invoices overdue, the 40-euro flat-rate indemnity applies to each invoice individually. Three overdue invoices = 3 x 40 = 120 euros in flat-rate indemnities, in addition to the interest calculated on each invoice.

4. The 40-euro fixed recovery indemnity

Established by Article D441-5 of the Code de commerce (decree no. 2012-1115 of 2 October 2012), this indemnity is owed automatically for every invoice paid late, from the very first day of delay. Key characteristics:

• Automatic: owed by operation of law, with no prior formal notice required.
• Per invoice: the indemnity applies to each invoice individually. If a client has 5 overdue invoices, you can claim 5 x 40 = 200 euros.
• Cumulative: it is added on top of late payment interest. Both are payable simultaneously.
• Not subject to VAT: the flat-rate indemnity is not turnover. It does not count towards your social contribution base as an auto-entrepreneur.
• Mandatory mention: its existence and amount must appear in your general terms and conditions and on every invoice.

5. Additional recovery costs beyond the 40 euros

Article D441-5 also provides that if actual recovery costs exceed 40 euros, the creditor may request additional compensation on presentation of supporting documents. This covers in particular:

• Costs of sending a formal notice by registered mail (LRAR): approximately 7 to 10 euros
• Fees charged by a debt collection agency: typically 10% to 25% of the recovered amount
• Fees of a commissaire de justice (bailiff): variable depending on the document served (50 to 200 euros for a notification)
• Lawyer fees in the event of court proceedings

To obtain this additional compensation, you must produce evidence of the costs incurred. The claim is addressed to the debtor and, if refused, to the court as part of recovery proceedings.

6. Mandatory mentions on your invoices

Article L441-9 of the Code de commerce requires each invoice to state the payment conditions, including in particular:

• The payment due date (or the applicable payment term)
• The late payment interest rate applicable in case of late payment
• The amount of the fixed recovery indemnity (40 euros)

Omitting these mentions constitutes an offence punishable by a fine of 15 euros per missing mention per invoice, capped at 25% of the invoice amount. For a natural person (auto-entrepreneur), the administrative fine can reach 75,000 euros; for a legal entity, 375,000 euros.

7. How to claim your penalties: a gradual process

In practice, most creditors adopt a progressive approach to preserve the business relationship while asserting their rights:

Step 1 (D+1 to D+7): Friendly reminder
A simple email or phone call noting the overdue date and the amount owed. No mention of penalties at this stage. The objective is to detect a simple oversight.

Step 2 (D+8 to D+15): Formal follow-up
A more structured email citing the invoice, due date, number of days late, and reminding of the existence of late-payment penalties and the statutory flat-rate indemnity. The tone remains professional but firm.

Step 3 (D+15 to D+30): Follow-up with penalty breakdown
A letter or email detailing the precise amount of accrued penalties and the flat-rate indemnity. Cite the legal reference (Article L441-10 of the Code de commerce). Set a response deadline (8 days).

Step 4 (D+30): Formal notice (mise en demeure)
Send a formal notice by registered mail with acknowledgement of receipt (LRAR). This letter must include the explicit words "mise en demeure", a detailed breakdown of amounts owed (principal + penalties + flat-rate indemnity), and a final payment deadline (typically 8 to 15 days). The formal notice triggers statutory interest under Article 1344 of the Civil Code, in addition to commercial penalties.

Step 5 (beyond D+45): Legal recovery
Application for an injonction de payer (payment order) at the competent court, or engagement of a commissaire de justice. Late-payment penalties and the flat-rate indemnity are included in the claim.

8. Special case: B2C relationships

The Article L441-10 regime (late-payment penalties and the 40-euro indemnity) applies only between businesses. For debts owed by individuals, the regime is that of the Civil Code:

• Late-payment interest accrues from the date of the formal notice (mise en demeure) (Article 1344 of the Civil Code), not automatically.
• The applicable rate is the statutory interest rate (published in the Journal Officiel each semester), unless a contractual rate has been agreed.
• There is no automatic 40-euro flat-rate indemnity in B2C transactions.

Frequently asked questions

Are late-payment penalties mandatory, or can I waive them?

You are not required to claim the penalties, but you are required to mention them on your invoices and in your T&Cs. The mention is a legal obligation; whether you actually enforce them is a commercial decision. However, systematically waiving penalties could be reclassified by the authorities as an unjustified commercial advantage, or even a restrictive competitive practice in certain cases (particularly between large companies).

How do I calculate penalties if the client makes a partial payment?

In the case of partial payment, late-payment penalties apply only to the remaining amount due after the partial payment. If a 5,000-euro (excl. VAT) invoice is paid to the extent of 3,000 euros on the due date and 2,000 euros 20 days later, the penalties are calculated on 2,000 euros over 20 days. The 40-euro flat-rate indemnity remains due in full, since payment was not made in full by the due date.

Are late-payment penalties subject to VAT?

No. Late-payment penalties and the fixed recovery indemnity do not constitute consideration for a supply of goods or services. They are therefore not subject to VAT (BOI-TVA-BASE-10-10-40). You invoice them net, without VAT. They are also excluded from your turnover for VAT exemption threshold calculations.

My client disputes the invoice: do penalties still accrue?

If the dispute is justified (invoice error, non-conforming service), penalties accrue only from the date the dispute is resolved or a corrective invoice is issued. If the dispute is purely dilatory (the client acknowledges the debt but is stalling for time), penalties accrue normally from the original due date. In case of disagreement about whether the dispute is legitimate, the court decides.

Is there a tool to calculate penalties automatically?

Yes. Dokta includes an automatic late-payment penalty calculator that applies the rate from your T&Cs (or the legal minimum by default), computes interest day by day, adds the 40-euro flat-rate indemnity, and includes the full breakdown in your reminders. You can also use our free online calculator.