New limits on supplier payment terms (July 2013)

New provisions limiting the term for payments to suppliers have been implemented in the Czech Commercial Code, effective July 1, 2013.

These changes affect all new as well as existing contracts concerning the supply of goods or services which are governed by the Commercial Code. They are expected to be particularly relevant for companies in the IT and real estate sectors, as well as businesses with a significant volume of receivables. Specific rules apply to public procurement (see below).

According to the new rules, the price for delivered goods or services is generally to be paid within 30 days from either:
(i) the delivery of the invoice;
(ii) the supply of the goods or services; or
(iii) the acceptance of the goods or services if agreed upon by the parties (which is generally to occur within 30 days after the goods or services were supplied).

The parties may explicitly agree a longer term for payment, with the maximum term for payment being 60 days. In exceptional cases only, the parties may agree a term exceeding 60 days.

It may generally be concluded that the Commercial Code introduces, for almost all relationships governed by the Commercial Code, an ultimate deadline for payment of 30 + 60 days, starting on the date on which the goods or services were supplied.

Even stricter rules are introduced in relation to public procurement where the public contracting entity is to pay the price for the supply of goods or services within 30 days and the term may be extended to a maximum of 60 days only in exceptional cases. It can be concluded that the ultimate deadline for payment by the public contracting entity will usually be 30 + 30 days starting from the date on which the goods or services were supplied. The same rules also apply to the relationship between the supplier and its subcontractors.

In addition to the above, the Commercial Code newly prohibits contractual terms that exclude default interest or compensation for debt recovery costs.