A business paid late by another business is entitled to interest without making any demand, under section 5 of Law 123(I)/2012, at the reference rate plus eight percentage points, together with a fixed forty euro for recovery costs under section 8. A term excluding either of those is grossly unfair by statute. Where nothing was agreed, the clock starts thirty days after the invoice.
Most Cyprus businesses chasing an unpaid invoice believe they are asking for a favour, and that interest starts only if they threatened it in writing. Neither is right. The Combating of Late Payments in Commercial Transactions Law 123(I)/2012 gives the creditor an entitlement that arises by itself, sets the rate, adds a fixed sum for the trouble of collecting, and treats a contract term that takes any of it away as grossly unfair.
It applies to commercial transactions, meaning business to business and business to public authority. It is not a consumer statute and it has nothing to do with the interest a court may award on a judgment.
Interest that does not need to be asked for
Under section 5(1), in commercial transactions between undertakings the creditor is entitled to interest for late payment without any demand being necessary, on two conditions: the creditor has performed its contractual and legal obligations, and the creditor has not received the amount due on time, unless the debtor is not responsible for the delay.
That first condition is the one worth reading twice before writing a letter. A creditor who has not finished what it was contracted to do, or who cannot show that it did, is not in the section. The second condition puts the burden the other way: the debtor has to be responsible for the delay for the entitlement to arise, but delay is presumed to be theirs unless something else explains it.
The rate, and where it comes from
Section 2 defines the statutory interest for late payment as simple interest at a rate equal to the reference rate plus eight percentage points, published on the website of the Ministry of Commerce, Industry and Tourism. Under section 5(2) the applicable reference rate is the rate in force on 1 January for the first half of the year and on 1 July for the second, so it is fixed twice a year rather than moving with every change.
It is simple interest, not compound, and the eight points sit on top of the reference rate rather than replacing it.
When the clock starts
Under section 5(3)(a), where the contract fixes a date or a period for payment, interest runs from the day after that date or the end of that period. Where the contract fixes nothing, section 5(3)(b) gives thirty calendar days, and it sets out which thirty:
- thirty days from the debtor's receipt of the invoice or an equivalent request for payment;
- where the date of receipt of the invoice is uncertain, thirty days from receipt of the goods or the provision of the services;
- where the debtor receives the invoice before the goods or services, thirty days from receipt of the goods or provision of the services;
- where an acceptance or verification procedure is provided for by law or by the contract, and the invoice arrives before or on the day of that acceptance or verification, thirty days from that date.
Two limits stop those provisions being drafted around. Section 5(4) caps an acceptance or verification procedure at thirty calendar days from receipt of the goods or services, unless expressly agreed otherwise in the text of the contract and provided the longer period is not grossly unfair to the creditor. And section 5(5) provides that a payment period fixed by the contract must not exceed sixty calendar days, subject to the same two conditions. A ninety day payment term in a supply contract is therefore not simply a commercial choice; it has to survive section 9.
Where the debtor is a public authority
Section 6 deals with that case separately and more strictly. The creditor is entitled to statutory interest on the expiry of the period, again without any demand and on the same two conditions. Under section 6(3)(a) the payment period must not exceed thirty calendar days, calculated from the same four starting points as above, and under section 6(3)(b) the date of receipt of the invoice cannot be the subject of a contractual agreement between the parties.
Section 6(4) allows the thirty days to be extended to a maximum of sixty calendar days for defined categories, among them a public authority carrying on an economic activity of an industrial or commercial nature by offering goods or services on the market.
The forty euro nobody claims
Section 8(1) provides that where interest for late payment becomes due under section 5 or section 6, the creditor is entitled to receive from the debtor a fixed sum of forty euro. It is payable without any demand being necessary and it is compensation for the creditor's recovery costs. It is per debt rather than per year, and it is almost never asked for.
Section 8(2) adds that the creditor is entitled, in addition to that sum, to reasonable compensation for any remaining recovery costs above it. That is the provision that carries the cost of instructing someone to collect, and it is worth quantifying in the letter rather than leaving it to be argued later.
Terms that do not survive
Section 9(1) provides that a contractual term or a practice concerning the date or period for payment, the rate of interest for late payment, or the compensation for recovery costs, which is grossly unfair to the creditor, is either unenforceable or gives rise to a claim for damages. The assessment takes account of all the circumstances, including any gross deviation from good commercial practice contrary to good faith and fair dealing, the nature of the product or service, and whether the debtor has any objective reason to depart from the statutory rate, the payment periods, or the forty euro.
Two kinds of term are settled by the statute itself. Section 9(2): a term or practice excluding interest for late payment is deemed grossly unfair. Section 9(3): a term or practice excluding compensation for recovery costs under section 8 is deemed grossly unfair. Neither needs to be argued case by case.
Two provisions worth knowing about
Section 12 preserves retention of title: the seller keeps ownership of the goods until the price is paid in full, where a retention of title clause was expressly agreed between the parties before delivery. Agreed afterwards, or printed on the invoice that followed the goods, it does not do the work.
Section 5A gives the Supervising Authority power to receive written complaints about alleged breaches in business to business transactions, and section 10 allows organisations with a legitimate interest in representing undertakings to go to court about terms that are grossly unfair. Neither replaces the creditor's own claim, and neither is a reason to wait.
Questions we are asked
Do I have to warn the debtor before interest starts running?
No. Section 5(1) gives the creditor interest for late payment without any demand being necessary, provided the creditor performed its own obligations and the money did not arrive on time. A reminder is good practice and evidence, not a precondition.
Our contract says nothing about payment terms. When is the invoice late?
Thirty calendar days, under section 5(3)(b), normally counted from the debtor's receipt of the invoice. Where the date of receipt is uncertain, or the invoice arrived before the goods or services, the thirty days run from receipt of the goods or the provision of the services instead.
The customer insists on ninety day payment terms. Is that allowed?
Not by default. Section 5(5) provides that a contractual payment period must not exceed sixty calendar days unless it was expressly agreed in the text of the contract and the period is not grossly unfair to the creditor under section 9. A long term imposed on a supplier with no bargaining power is exactly what that section is aimed at.
What is the interest rate?
Simple interest at the reference rate plus eight percentage points, as defined in section 2 and published on the website of the Ministry of Commerce, Industry and Tourism. Under section 5(2) the reference rate is the one in force on 1 January for the first half of the year, and on 1 July for the second, so it is fixed twice a year.
Can I claim the cost of chasing the debt?
Yes, and the first part of it is fixed. Section 8(1) entitles the creditor to forty euro without any demand, as compensation for recovery costs, once interest becomes due. Section 8(2) allows reasonable compensation for recovery costs above that sum. A contract term excluding either is deemed grossly unfair by section 9(3).
Our terms say no interest is payable on late invoices. Does that hold?
No. Section 9(2) deems a contractual term or practice excluding interest for late payment to be grossly unfair, and section 9(1) makes a grossly unfair term either unenforceable or a ground for a claim in damages. It is one of the few clauses the statute condemns without any weighing exercise.
This article is for general information only and does not constitute legal advice. Laws and their application can change, and individual circumstances differ. For advice on your own matter, contact Klitos Platis at klitos@kleanthousplatis.com or telephone +357 22 680 330.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Published 22 August 2026
Need advice on your own matter?
Send us the documents and a short description at office@kleanthousplatis.com and we will reply within one business day.
Or use the enquiry form, message us on WhatsApp, or call +357 22 680 330.
When Cyprus law changes, hear it from us
One short email when something changes that matters: new legislation, a decision worth knowing, a deadline. Written by the partners, no marketing, unsubscribe with one click.
Your address is used for these updates and nothing else.