Directive 2011/7/EU on combating late payment in commercial transactions

Directive 2011/7/EU on combating late payment in commercial transactions

REPUBLIC OF SERBIA Chapter 20 - ENTERPRISE AND INDUSTRIAL POLICY Ministry of Finance of the Republic of Serbia Brussels, 1 July 2014 2

LAW ON LATE PAYMENTS IN COMMERCIAL TRANSACTIONS 3

REASONS FOR REGULATING THE SUBJECT MATTER Enabling regularity of payments in the commercial transactions; Increase of Serbia s economic liquidity; Regularity of Public sector s transfers to the corporate sector; Predictability of the collection of receivables and the increase of the possibility of production and reinvestment planning. 4

LEGAL SOLUTIONS The law came into force on December 2012, and effect from March 31, 2013; It is largely in compliance with the Directive; The Law is applied to all subjects of Public and Private sector; Bankrupt commercial entities are exempted from the Law (debtors in commercial transactions); 5

LEGAL SOLUTIONS The Law stipulates a late payment fee in the amount of RSD 20,000 (173 EUR), where the payment is not made by the deadlines stipulated by this Law (regulation more strict than the Directive); The right to late payment fee shall not preclude the entitlement of the creditor to claim damages under the contract or pursuant to other regulations. 6

LEGAL SOLUTIONS Interest in the amount determined by the law governing default interests shall accrue on all payments that have not been made by the deadline. Contractual provisions that are not in accordance with the provisions of this Law shall be deemed null and shall not have any legal effect; Court proceedings for the enforcement of outstanding payments, within the meaning of this law, shall be urgent. 7

DEADLINES SET FORTH BY LAW Payment deadlines among the commercial entities are: - General deadline up to 60 days; Exceptions: If contractual obligations require payment in instalments, the paying term can be no more than 90 days (half of the obligation has to be paid within the first 45 days of the paying term) The Law allows the freedom to determine the deadline by posting security; A contract between a registered agricultural farm or agricultural cooperative and another commercial entity, where the debtor is a registered agricultural farm or agricultural cooperative, may stipulate a longer deadline in the event of the procurement of raw materials for performing registered activities and for the purchase of seeds, seedlings, pesticides and fertilizers. 8

DEADLINES SET FORTH BY LAW The payment deadlines between the public sector and and commercial entities: deadline up to 45 days when the Public sector is a debtor; 9

DEADLINES SET FORTH BY LAW Gradual shortening of payment deadlines in commercial transactions with commercial entities where public sector bodies are debtors is introduced for the National Health Insurance Fund (RFZO) and the beneficiaries of the National Health Insurance Fund. The deadlines that shall apply to RFZO until January 1, 2015: 1) From March 31, 2013 to December 31, 2013 the payment deadline may not exceed 150 days; 2) From January 1, 2014 to December 31, 2014 the payment deadline may not exceed 120 days; 3) From January 1, 2015 the payment deadline may not exceed 90 days. 10

SANCTIONS STIPULATED BY LAW A legal entity, commercial entities, or a public sector subject shall be fined between RSD 100,000 and 2,000,000 (865-17,240 EUR) in the event that it does not make its payments by the deadlines set forth by this Law. A sole proprietor shall be fined between RSD 10,000 and 500,000 (87-4,325 EUR) in the event that it does not make its payments by the deadlines set forth by this Law. An individual farm holder, within the meaning of the law governing agriculture and rural development, shall be fined between RSD 10,000 and 150.000 (87-1,297 EUR) in the event that they do not make their payments by the deadlines set forth by this Law. 11

SANCTIONS STIPULATED BY LAW Responsible person of a public sector body shall be fined between RSD 5,000 and 150,000 (43-1,300 EUR) where the public sector body managed by that person does not make their payments by the deadlines set forth by this Law. The representative of a company, cooperative, or any other legal entity established under a particular law shall be fined between RSD 5,000 and 150,000 (43-1,300 EUR) if such legal entity does not make its payments by the deadline set forth by this Law. The Minister shall be deemed responsible for compliance by a Ministry; the Provincial Secretary in charge shall be deemed responsible for compliance by a Provincial Secretariat; the head of a municipality shall be deemed responsible for compliance by the municipality; while the managing director of a public enterprise or head of another public sector entityshall be deemed responsible for compliance by such public enterprise or entity. 12

MONITORING Monitoring stipulated by the Law shall be conducted by: Ministry responsible for finance monitors the implementation of this law in commercial transactions between commercial entities. The Treasury Directorate, the Treasury of the Autonomous Province and the Treasuries of local authorities monitor the users of public funds. The method and procedure of monitoring and conducting this law is stipulated by bylaws. 13

MONITORING IMPLEMETATION OF LAW BETWEEN COMMERCIAL ENTITIES While monitoring the implementation of the Law between Business subjects, the Ministry of Finance shall file a request for initiating misdemeanor proceedings to the competent misdemeanor court upon the receipt of: Legally binding court order for execution (in relation to the obligation from the commercial transactions between the commercial entities); Upon receiving notice of the commercial entitie that is a creditor in a commercial transaction (between the commercial entities). 14

MONITORING USERS OF PUBLIC FUNDS In accordance with the Law on Late Payments in Commercial Transactions, the Treasury Department established the RINO Project a Web application for the Register of Payments. Monitoring the implementation of the aforementioned Law by the beneficiaries of public funds is being conducted through the application, via input, or delivered data. 15

RINO PROJECT WEB application for the input of data and generating reports; The application was created in a short time frame, with the Treasury Department s own resources; This on-line application is available to the users 24/7, and is located on the Treasury Department s web-site; The Project - Register of Payment: http://rino.trezor.gov.rs ili http://rino,trezor.rs www.trezor.gov.rs 16

WHO DELIVERS DATA? Direct and indirect users of public funds of the Republic of Serbia, or the local governments; Direct users of public funds are the organs and organizations of the Republic of Serbia authorities and services of local government; Indirect users of public funds are: judicial authorities, budgetary funds; local communities; public companies, funds and directorates founded by the local communities funded by the public incomes and whose purpose is determined by a special law; institutions founded by the Republic of Serbia, or the local governments, over which the founder performs legally established rights about managing and funding through direct beneficiaries of the budget. 17

WHO DELIVERS DATA? Organizations for mandatory social insurance and the beneficiaries of these organizations funds Beneficiaries of organizations for mandatory social insurance s funds are the National Health Insurance Fund - RFZO, the National Employment Service - NSZ and the Pension and Disability Insurance Fund - PIO Fund) as well as the beneficiaries of the National Health Insurance Fund (health and pharmaceutical institutes founded by the Republic of Serbia or the local government); 18

Beneficiaries access the application directly and input the mandatory data The mandatory data that needs to be input is regulated by the Rulebook The Beneficiaries of public funds must enter data about new payments within the 3 days of the paying agreement or the reception of the payment documentation They are also obligated to enter the data about payment within the 3 workdays of the payment 19

The data is being delivered electronically, in an XML format, which requires certain structure. There is also an EXCEL chart as an aid in generating the XML file. 20

LEVEL OF ACCESS The Treasury Directorate accesses data for all the beneficiaries of the budget of the Republic of Serbia. Treasury Directorates of Cities and Municipalities have access and an insight into the data for all the beneficiaries of the local budgets 21

OVERVIEW AND REPORTS Overview Predefined views Contains 6 predefined views, including the overview of all the payments 7 days before the deadline Reports Within the application itself, a section with reports was implemented. Generating reports by looking at unsettled payments Every workday, the Ministry of Finance publishes a review of the Registry of payments (RINO) on its web-site 22

LAW ON 2014 BUDGET If the payments towards the commercial entities are not settled in accordance with the Law that regulates the deadlines for payments in commercial transactions: Beneficiaries of the budget of the Republic of Serbia shall have their appropriations temporarily suspended Beneficiaries of the budget of the local government shall have the transfer of the funds from the budget of the Republic of Serbia, or their part of the revenue from the wage tax and corporate income tax temporarily suspended. 23

EFFECTS OF THE LAW With this Law coming into force, payment deadlines in the Republic of Serbia have been shortened by 15 days, in average, which doesn t reflect the realistic positive steps caused by this law. Namely, the experiences of Serbian commercial entities, as well as the analyses made by the foreign investors, speak in favour of the need for continuous tracking of the implementation of this law in the sense of improving the business environment and liquidity in the corporate sector, but also of these positive steps : Clear rules and payment conditions set (particularly when it comes to SMEs); Assessment of the cash flow can be easily made; 24

EFFECTS OF THE LAW Registration of all budget beneficiaries is in a central register, public and timely information about the beneficiaries who do not comply with the agreed payment deadlines; Diligent settlement of financial obligations by the budget beneficiaries. It was particularly emphasised, as a positive contribution of the Law, that discipline and a continuous control was established over the public funds beneficiaries by using RINO application, keeping in mind that the biggest debtors, before this law came into force, were the beneficiaries of the budget funds. Everything stated above evidences a clear intention of the Republic of Serbia to deal with all those who contribute to illiquidity in the corporate sector with zero tolerance. 25

PLANS Conducting even stricter control (particularly of the beneficiaries of the budget); Improving the instruments for more efficient collection of payments, with a purpose to lower the existing illiquidity; Complete harmonization with the Directive, on the day of Serbia s EU accession. 26

CONCLUSION The actions taken for transposing of the Directive, despite the fact that Serbia is not an EU member state, speak of a clear and firm intent for the domestic legislation to be harmonized with the regulations and the good practice of the EU. 27

REPUBLIC OF SERBIA Ministry of Finance The Treasury Directorate Thank you for your attention! QUESTIONS 28