Late Payment Interest in Switzerland: Deadlines & Calculation for SMEs

Issuing an invoice and waiting months for payment costs more than your patience — it costs you money. Swiss contract law entitles creditors to claim late payment interest, yet many SMEs and freelancers never enforce it because they don't know the rules or are unsure how to document the calculation correctly. This article clears up the most common misconceptions.

When does default occur — and when does interest start running?

Swiss contract law (CO Art. 102 ff.) distinguishes two scenarios:

Payment due date is contractually specified. If your invoice states "due within 30 days" and the customer doesn't pay on day 31, they are in default from that point on — without a reminder. Interest accrues automatically on the first day after the deadline expires.

No due date clause. If no concrete payment deadline is stated, the creditor must issue a reminder (CO Art. 102 para. 1). Only with the reminder does the debtor fall into default, and interest starts accruing on the day following receipt of the reminder.

Standard rate vs. agreed interest rate

The statutory late payment interest rate in Switzerland is 5 % per annum (CO Art. 104 para. 1). This applies unless the parties have agreed otherwise in writing. For merchants (e.g. businesses with a commercial register entry), rates of 6 % or 8 % are common in practice. Consumer contracts are more strictly regulated; the statutory rate generally applies.

Important: Late payment interest on an invoice is not the same as the VAT penalty interest charged by the Swiss tax authorities for late tax payments.

How to calculate late payment interest

The formula is straightforward:

Late payment interest = Outstanding amount × Interest rate × Days in default / 365

Example

• Outstanding invoice: CHF 4,800.00 (incl. 8.1 % VAT)
• Payment terms on invoice: 30 days
• Actual payment: 62 days after invoice date → 32 days in default
• Interest rate: 5 %

CHF 4,800.00 × 0.05 × 32 / 365 = CHF 21.04

The late payment interest amounts to CHF 21.04. This amount should be shown separately on the reminder or on a separate interest invoice.

Calculation basis: gross or net amount?

Late payment interest generally accrues on the gross amount (including VAT), because the entire civil claim against the debtor includes the VAT portion. The VAT treatment of the interest itself is a pass-through item for the recipient — you do not have to declare the interest received as taxable income for VAT purposes.

Deadlines at a glance

Situation	Default from	Interest accrues from
Due date stated on invoice	Day after deadline	Day after deadline
No due date, reminder sent	Receipt of reminder	Day after reminder received
Court collection proceedings	Date of payment order	Day after payment order

Common mistakes when claiming late payment interest

1. Not showing interest on the reminder. If you claim interest, you must state the exact amount. A vague reference to "plus late payment interest" without a figure and calculation period is difficult to enforce in court.

2. Forgetting the limitation period. Claims for goods and services supplied are subject to a 5-year limitation period in Switzerland (CO Art. 128). This applies to the accrued late payment interest as well. If you wait more than five years without interrupting the limitation period, you lose your claim.

3. Getting the interest start date wrong. Interest does not begin on the invoice date, but on the day after the due date expires. Being off by one day might seem trivial, but with large amounts or long default periods, the error adds up noticeably.

4. Not sending reminders in a traceable way. Reminders sent by email without read receipts or by ordinary post are difficult to prove. If in doubt, use registered mail or a tool that documents the exact time of dispatch and receipt. Our guide to the Swiss dunning process — from reminder email to debt collection walks you through setting up each step correctly.

5. Claiming interest on disputed amounts. If the debtor reasonably disputes the invoice, you cannot enforce interest on the disputed portion. When issuing a reminder, clearly separate the undisputed from the disputed portion.

Late payment interest and VAT: What applies?

For VAT-liable service providers, late payment interest is not a taxable supply (VAT Act Art. 18 para. 2 lit. d). It is therefore not subject to VAT and is invoiced without VAT on the interest invoice or reminder. This applies regardless of whether you use the actual method or the simplified accounting method.

If you regularly issue VAT-liable invoices and have questions about how to classify interest, the overview in Swiss VAT basics 2026 — rates, duties and special rules provides a solid foundation.

Anchor late payment interest in your terms and conditions

The cleanest approach: set out interest rates, due dates, and reminder fees in your general terms and conditions. This way, not just the statutory minimum rate applies, but your individually agreed terms — provided your GTC were provided and accepted before contract conclusion. A typical clause:

"In case of late payment, interest of 6 % p.a. is due from the first day after the due date. Additionally, a flat reminder fee of CHF 20.– is charged per reminder stage."

Key takeaways

• Late payment interest arises automatically from the day after the due date — provided a concrete payment deadline is stated on the invoice.
• The statutory rate is 5 % per annum; businesses can agree on different rates in writing.
• Calculation: Gross amount × Interest rate × Days in default / 365.
• Late payment interest is not subject to VAT and is invoiced without tax.
• Claims expire after 5 years — reminders and collection proceedings interrupt the limitation period.
• Keep reminders in writing and traceable; complete documentation is crucial if a dispute arises.

If you already issue invoices with a clear due date and a QR-bill, you've laid the best foundation for acting quickly and correctly when payment is late — the SnapBill invoice generator lets you set the payment deadline with just a few clicks.