Increase of legal interest rate in civil and commercial matters

Each year in January the Federal Government Service for Finance publishes the legal interest rate. The legal interest rate applies in civil and commercial matters. It increases from 3,75% in 2011 to 4,25% in 2012.

Contractual interest rate in civil and commercial matters

When you enter into an an agreement (i.e. the obligation to pay an amount in cash) and the contracting party does not fulfill its obligations, you can claim damages. Normally arrangements are made in the contract and the contractual interest rate applies. In Belgium, parties can also stipulate which interest rate will be applicable in case of default payment. However the courts remain competent to decrease excessive interest rates.

Legal interest rate in civil and commercial matters

If parties do not arrange for a contractual interest rate, the legal interest rate is applicable. The legal interest rate is applicable in civil and some commercial matters (e.g. for a transaction between a trader and a private individual). As of 1 January 2007, the legal interest rate is linked to a market interest rate consisting out of: the 12-month Euribor interest rate during December (2,030%); rounded to the higher multiple of 0,25% (2,25%); and increased with 2% (4,25%). Euribor (Euro InterBank Offered Rate) is the average interest rate against which a selection of banks provide short-term loans in Euro amongst each other. For 2012 it amounts to 4,25%.

Legal interest rate for late payment in commercial transactions

For commercial transactions the Law of 2 August 2002 on combatting late payments in commercial transactions is applicable. Commercial transactions are transactions between companies, or between companies and the Government. The transaction should imply a supply of goods or services for consideration. It applies to traders, liberal professions, craftsmen and farmers. The legal interest rate for late payment in commercial transactions is only applicable when parties did not foresee a contractual interest rate. The creditor has an “automatic” right to interest when his debtor pays too late. He should not send a proof of default. The interest is also due after the agreed payment term.

The six month update of the legal interest rate for late payment in commercial transactions is published twice a year in the Belgian Official Gazette. The interest rate applicable for the first semester of 2012 to late payments in commercial transactions amounts to 8%. This is a decrease of 0,5% compared to the second semester of 2011. The legal interest rate for the first semester 2011 was also 8%.

Legal interest rate in fiscal and social matters

In fiscal matters a specific rate of 7% per month applies. Only in case of explicit contravention to the rule, the legal interest rate applies. Since 2009 the interest rate in social matters is the same as in fiscal matters (7%).