Debt Collection In Italy

Author:Giambrone Law ILP
Profession:Giambrone Law ILP
 
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Regulations in Italy stipulate that business-to-business transactions must be paid within 30 days from the invoice date, and any extension beyond the period gives the creditor the right to claim interest without a dunning letter, as per the rate agreed upon on the agreement contract. If there is no agreement in place, then the European Central Bank interest rate, which is reviewed in January and July, increased by at least 8% points, is applied. Although the rates are authorised by law, proper negotiation should be engaged in, including signatories from both parties, to avoid the terms being considered unfair. This particular regulation in Italy is more constricting than the original European Union Recast Directive 2011/7/EU, which is now included in Italian domestic law (Decreto Legislative 9 novembre 2012, n.192).

Days Sales Outstanding

However most businesses in Italy fail to submit payments within the required 30 day period which makes collection of late payments more problematic. The average payment period for the private sector is around 100 days, whilst in the public sector, the period of payment can range up to 1 year.

Debt Collection Costs

As well as interest charges on late payments, creditors are entitled to receive a flat fee of €40 to recover collection costs. However Italian debtors rarely pay recovery costs and it is often used as a negotiation tool instead.

Ownership Protection

Under Italian law, Retention of Title (RoT) agreements aimed at preserving the goods till the invoice in question is paid in full is allowed, although the enforcement of such a regulation is uncommon.

The RoT provisions can only be enforced if registered before a notary at a date that is verifiable (data certa' as provided under Article 1524 of the Civil Code, and under Article 11(3) of Legislative Decree 231/2002 implementing Directive 2005/35/EC on combating late payment in commercial transactions). In Italy the RoT was originally formed to address insolvency proceedings with an aim of preventing collusion between the defaulting debtor and creditor putting other creditors at a disadvantage.

While this procedure is costly, lack of relevant case law makes the enforcement of RoT provisions sporadic due to a lack of relevant case law.

PAYMENT PROCEDURE

Ownership Protection

Under Italian law, Retention of Title (RoT) agreements aimed at preserving the goods till the invoice in question is paid in full is allowed, although the enforcement of such a regulation is uncommon.

The RoT provisions can only be enforced if registered before a notary at a date that is verifiable (data certa' as provided under Article 1524 of the Civil Code, and under Article 11(3) of Legislative Decree 231/2002 implementing Directive 2005/35/EC on combating late payment in commercial transactions). In Italy the RoT was originally formed to address insolvency proceedings with an aim of preventing collusion between the defaulting debtor and creditor putting other creditors at a disadvantage. While this procedure is costly, lack of relevant case law makes the enforcement of RoT provisions sporadic due to a lack of relevant case law.

Payments Options

Below are the most common methods of payments:

Sepa bank transfer is a fast and secure method. Standby Letters of Credit repayment ability and credit quality of debtor guaranteed by bank. Guarantee bonds debtors fail to fulfil contractual agreement. Documentary Letters of Credit debtor agrees specific amount to be paid to beneficiary through bank once terms agreed. Bills of Exchange (cambiali) used as debt recognition titles rather then to affect payment. Cheques (assegni) used as form of payment, failure to pay within six months may lead to debtor being excluded from the banking system for a period of six months. RID is the best way of getting paid. It is where the debtor directs and authorises the bank to accept debit orders on their behalf. RI.BA is a financial instrument that allows creditors to receive payment from the debtor's bank if the collecting party is able to supply the required supporting documents. Amicable Action

Giambrone can engage in negotiating alternative ways to formal legal proceedings, which are often lengthy and very costly. Before commencing formal legal...

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