5 questions about the 30-day payment law
In Chile, the norm that promotes the timely payment to small and medium-sized companies (SMEs) began to govern. In Hispanic Entrepreneurs Concepción we answer 5 questions about the 30-day payment law. A text that seeks to limit the delay in payments and that this sector has liquidity to continue operating. Update 2023 at the end of the note.
An achievement for SMEs
Among the challenges presented by small and medium-sized companies in Chile is the delay in paying bills. Until now, the companies that buy or benefit from a service have had between 60 and 120 days to return the capital. Which presented a problem to continue working.
The objective of the law that was enacted in January is to establish the conditions for SMEs receive timely payment. For some years now, this sector has been demanding such a rule, since delays in paying bills is one of its main obstacles.
The law establishes new payment terms and clearer rules in this regard. In addition, it refers to other related topics such as the issuance of electronic dispatch guides, interest for delay, immutability of the amount to be paid, among others.
It is estimated that 1 million SMEs will benefit from this rule. Upon receiving the timely payment they will be able to invest and grow. And it also means that fairer trade relations will be established. The legal text that came into effect on May 16 will be applied gradually to all companies that are issuers and recipients of invoices.
Measures like this improve the entrepreneurship environment in Chile. So if you are thinking about becoming an entrepreneur or already have a project underway, you must keep up to date with these changes.
5 questions about the 30-day payment law
We review the most important points of the 30-day Payment Law.
- Since when does the law of timely payment apply to SMEs?
The legal text began to take effect from May 16, four months after its enactment. But the implementation will be gradual to allow companies to make the necessary adjustments.
In principle, private sector companies have up to 60 days to pay outstanding bills. This will be the case until February 2021. While those in the public sector are required to pay within 30 days from the time the rule began to apply. In this sense, there are exceptions that include the public health services, municipalities and Cenabast. These have a period of 29 months to start paying 30 days; that is, until June 2021.
Another deadline that was established is the delivery of the electronic dispatch guides. These must be issued as of January 16, 2020, one year after the law's publication. While the administrative penalties for not meeting the payment deadlines will also apply one year after publication.
- What sectors does the law affect?
According to official government page la Payment Law 30 days it is of general application. This means that it affects companies of any size, whether they are in the public or private sector.
It makes clear that commercial operations outside of Chile are outside the scope of application.
- Can deadlines other than 30 days be established?
The companies that issue and receive the invoices can agree on a different payment term of 30 days. But for this agreement to be valid, it must be submitted in writing to a registry of the Ministry of Economy, Development and Tourism.
There are certain conditions so that an agreement of this type can be carried out. In general terms, they should not delay the payment of invoices in an undue manner, establish interest payments lower than those established by law, among others.
- What happens if the payment term is not met?
The law grants SMEs the right to charge interest on late payment when the established payment term is not met. The company that issues the invoice will establish the amount of interest according to what is established in the regulation.
In addition to interest, a moratorium fee will also be paid. This commission corresponds to 1% of the amount to which the debt amounts.
- What does unfair competition for default mean?
Within the legal text appears the systematic breach of payment terms as a new act of unfair competition. In this way, they want to avoid abusive behavior by debtor clients.
With the application of this standard, it is sought that there is greater equality between small, medium and large companies. Likewise, it will allow to better organize the processes of sale, invoice issuance, dispatch guides and payments. All this, taken together, will favor business management.
As this is a new rule, there are many questions about the 30-day payment law that will be clarified in the coming months. What is clear is that it seeks a change in culture in companies so that the little ones have the opportunity to grow. If you want to know more about entrepreneurship, read our Hispanic Entrepreneurs magazine.
2023 update:
Gradual Implementation: The law has been implemented gradually, allowing companies to adapt to the new requirements. Initially, a payment period of up to 60 days was allowed, which was reduced to 30 days, 25 months after the publication of the law.
General Application: The law applies generally to all companies that issue and receive invoices within the national territory of Chile.
Interest and Late Fees: The law allows companies to charge interest and a late fee for late payments.
Unfair Competition: Systematic non-compliance with payment deadlines is considered an unfair competition practice according to the law.
Electronic Dispatch Guide: An electronic dispatch guide has been introduced to avoid delays and complications in the billing process.