Law on Prompt Payment of Invoices enters the Economy Commission after approval by the Chamber of Deputies

In August, the Chamber of Deputies approved, in general, the Bill for the “30 days payment Law” (“Prompt Payment Law”). This Bill was presented by members of the Senate, initially seeking to protect Small and Medium-sized Companies (SMEs) from the inexistence of a maximum period for the payment of their invoices, thus, being adversely affected by Large Companies due to the asymmetries that exist between them in their negotiation power.

Amendment to the current law:

Article 2 of Law 19,983 states that any unpaid amount of an invoice must be paid at any of the following times:

• Upon receiving the invoice.
• Within a period of time from the provision of the services or receiving the goods.
• On a fixed and determined day.

If nothing is indicated, they shall be paid within 30 days of being received.

Although the Bill was originally intended to protect SMEs, today it aims at the establishment of a general rule for SMEs and Large Companies, replacing, to this effect, Article 2 of Law 19,983 for the following:

“Article 2nd. The obligation to pay the amount due contained in the invoice must be fulfilled within a maximum period of 30 days from receiving the invoice. Notwithstanding the foregoing, within the first 24 months of validity of this article, the maximum payment term shall be 60 calendar days counted from receiving the invoice”.

However, not all are compliments from the Small and Medium-sized companies, as they ensure that it “does not really generate an incentive for the timely payment of invoices, but rather makes Small and Medium-sized companies responsible of requiring this payment from companies and of creating the corresponding procedures”.

Other amendments introduced by the Bill

1. Unenforceability of credit and debit notes: The current Bill also amends the Law in the sense of establishing the unenforceability of credit and debit notes issued for irrevocably accepted invoices, to look after the correct circulation of invoices in the market as tradable documents, granting more certainty to their future assignees.
2. Default interests:A new article 2 bis is added to Law 19,983, which establishes that interest shall be paid over any unpaid amount, at a rate equal to the Maximum Conventional Interest (IMC) allowed by the law for non-adjustable transactions of less than 90 days in national currency, for amounts equal or less than 5,000 Unidades de Fomento.
3. Guidelines regarding agreements with public Authorities: A new article 2 ter is added. It establishes a 30-day period for public authorities to pay invoices received from private entities for the supply of goods or provision of services. In well-founded cases, the respective bidding rules or services agreements may extend this term up to 60 days.
4. Amendments to the VAT Law:The Bill also establishes that the electronic issuance of delivery receipts shall be mandatory. Only those taxpayers who issue said documents only in paper may continue doing so. The issuance of said documents shall not imply that a sale has been made.
5. Tax credit:Although this possibility was not considered in the original drafting of the Bill, after a report of the Economy and Development Commission, the legislator decided to regulate this matter in the Bill’s transitory provisions. For the above, the IRS was requested to issue a report within 12 months, on the technical feasibility of giving taxpayers the right to a tax credit.