Your customer missed the invoice deadline. The receivable is still on the ledger, but the owner wants to know whether to add interest, charge VAT on it, or write off the original sale. Those are different decisions. An overdue invoice does not become a bad debt on day one, and a late-payment charge is not a new sale of the original service. Mixing those lines produces the wrong reminder and can also distort the VAT record.
I am Dmitri Schmidt, CEO of AccRes. This guide follows an ordinary invoice between two Estonian businesses from its due date to payment. It shows the legal starting point, a transparent calculation and the documents to keep with the receivable. The example assumes the seller fulfilled the agreed supply and the buyer has no justified ground to withhold payment. If the transaction itself is disputed, resolve that issue before treating the amount as a routine overdue balance.
Find the real due date before starting the clock
Under Law of Obligations Act § 113(1), (2) and (4), late interest follows a monetary obligation that has become due. In our example the agreed deadline is 30 September 2026, so delay begins the next day. Confirm the contract and when the buyer received the invoice; the invoice issue date alone is not always the payment deadline.
If the parties did not set a payment date for a reciprocal contract, § 82¹(1) makes payment due no later than 30 days after receipt of the invoice, or after delivery where receipt is unclear or the invoice arrived first. A contractual acceptance or inspection process can alter the starting point. Section 82¹(2) also limits reliance on B2B terms longer than 60 days unless expressly agreed and not grossly unfair. Public-procurement buyers and some agricultural/food-supply arrangements have special rules. Keep delivery and receipt evidence with the invoice.
Use the annual rate that actually governs the debt
Without an applicable higher contractual rate, §§ 94 and 113(1) set the statutory annual rate at the reference rate for that half-year plus eight percentage points. The reference is reset at 1 January and 1 July. A long-running debt may therefore need separate rate periods. Do not copy an old percentage from the footer of an invoice without checking the underlying agreement and the relevant half-year.
A higher agreed rate may govern. The debtor can seek reduction of an unreasonable amount under § 113(8) and § 162. Section 113(6) also bars charging late interest on unpaid interest or earlier late interest. Work from the unpaid principal. After a part payment, reconcile how the payment is allocated under the agreement and § 88, then recalculate the remaining principal rather than compounding charges.
Worked example: 15 days at an agreed 12%
Assume an Estonian B2B invoice has EUR 1,240 still due on 30 September 2026 and is paid on 15 October 2026. For this illustration, a valid contract sets 12% a year; that is a hypothetical agreed rate, not a claim about the statutory rate. Delay runs from 1 through 15 October, or 15 days. On the stated simple-interest, 365-day convention, EUR 1,240 × 0.12 × 15 ÷ 365 = EUR 6.12 after rounding.
If the customer paid part of the principal earlier, stop calculating on that part at its payment date and continue on the remaining amount. Send a statement showing the original invoice, deadline, receipts, annual rate, day count and arithmetic. Section 113¹(1) separately permits a EUR 40 collection-cost claim against a business debtor when late interest can be claimed. It is not another percentage to add to the interest base, and the B2B rule does not apply to consumer debtors.
Keep interest separate from the sale and its VAT
EMTA’s KMD INF guidance explicitly treats genuine late-payment interest as outside turnover for VAT purposes. Do not add another VAT amount to that interest merely because the original sale carried VAT. A statement can show the amounts together, but its interest line should be clearly separate. A charge labelled ‘interest’ that is in substance additional consideration for a supply needs a different analysis.
Under ordinary accrual VAT accounting, late cash alone does not reverse VAT on the original sale. Under VAT Act § 44, an eligible business using the cash accounting scheme has different timing tied to receipt; verify the scheme and transaction before filing. A later bad-debt adjustment has separate § 29¹ conditions, and § 29(7) bars a credit note solely for non-payment. Preserve reminders, part-payment records and objections to the supply.
For each overdue invoice, I keep four fields visible: principal, due date, receipts and rate. A single balance hides errors as soon as a customer pays in parts.
The starting point is an enforceable payment obligation, not an automatic invoice percentage. Establish when it fell due, confirm the rate and any buyer objection, count the delayed days, and reduce the base after each payment. Genuine late interest is separate from VAT turnover; the VAT on the original sale follows its own rules.
If several invoices and part payments have become tangled, contact AccRes. We can reconcile the receivables and prepare an interest calculation the customer can verify.