Interest and linkage on an unpaid debt: what the law allows you to demand since 1 January 2025

Service page: Debts and enforcement proceedings: what to do, and in what order — for debtors and businesses.

What changed on 1 January 2025: shekel interest instead of “linkage differentials and interest”

The Adjudication of Interest and Linkage Law (Amendment No. 9) came into force on 1 January 2025. Since then:

• The power: shekel interest or linkage differentials, at the court’s discretion. A court (and also an arbitrator, or an Execution Registrar in enforcement proceedings when setting an amount) may award shekel interest or linkage differentials on the amount. Linked interest together with linkage differentials, a different interest rate or linkage to a different index may be awarded only when there are reasons that justify it in the circumstances (section 2(a)). If “interest” was awarded without saying which, it is treated as shekel interest (section 2(d)).
• Late charges were added. On an amount that was not paid by the repayment date, shekel interest and late charges are added under the Law.
• The rates change every quarter, according to a formula in the regulations, and the Accountant General publishes them.

The definition of “linkage differentials and interest” was deleted from the Law. Sources that still present “linkage differentials and interest” as the rule are written according to the law before 2025.

Three sources of interest on a debt: what prevails

1. What the contract says. If the contract set interest for late payment, the court does not award interest under the Adjudication of Interest and Linkage Law; if linkage was agreed, it does not award linkage; and if late charges or another payment for late payment were agreed, it does not add late charges under the Law.
2. A special law. For example the Payments to Suppliers Law, which sets shekel interest and late charges on a supplier’s invoice that was not paid on time, under the conditions in that Law.
3. The Adjudication of Interest and Linkage Law, when there is no agreement and no special law.

The contract has a limit. When the customer is an individual and the debt is credit, the Fair Credit Law, 5753-1993 (חוק אשראי הוגן, התשנ״ג-1993) limits the cost: in a loan in shekels, up to the Bank of Israel interest rate plus 15 percentage points, and late-payment interest up to 1.2 times that. In enforcement proceedings, agreed interest applies “provided that the interest is not contrary to any law”. Liquidated damages clauses: validity and enforcement.

Shekel interest: how it is calculated

• When it starts: interest that the court awards on the amount runs from the day the claim was filed until the repayment date, and the court may set an earlier date, but not before the cause of action arose. The “repayment date” is the date set for payment, and if none was set, 30 days from the day of the decision. After the repayment date, shekel interest is added under the Law, until payment.
• How it accumulates: the interest is calculated for each day, at the annual rate divided by 365, and is added to the principal once every 12 months and on the repayment date.
• The rate: set for each quarter by a formula: 25% of the average, in the 12 months before the quarter, of the yield on tradable one-year corporate bonds with a high rating, and 75% of the anchor interest rate on credit in the banking system plus its margin (regulation 2 of the 2024 Regulations). A rate that has changed applies from the day of the change to the amount not yet paid.

The Accountant General publishes the rates for each quarter in Reshumot (the official gazette) and on the Ministry of Finance website; on the website, within 10 days from the end of each quarter.

Late charges: when they start and how much

• They are added every three months, starting three months after the repayment date. For a period shorter than three months, there are none.
• The amount: the updated principal, as it was on the last date on which interest was added to it, multiplied by a quarter of the annual rate of late charges (section 5A(b)).
• The annual rate: the lower of half the shekel interest plus 2 percentage points, and 6 percentage points.
• Late charges are not added to the principal, which means no interest is added on them.
• The court may decide, when it gives its decision, that they will not be added, or set a lower rate, for special reasons.

A debt in enforcement proceedings: a cheque and a claim for a fixed sum

• A cheque or a claim for a fixed sum: shekel interest is added to the amount from the repayment date until the deadline for filing an objection. If no objection was filed, from that date until payment shekel interest and late charges are added. The request for interest is filed together with the request for enforcement. In a claim for a fixed sum, the “repayment date” for this purpose is the day it was filed with the Execution Office.
• Agreed or statutory interest: if interest, linkage or late charges that are not contrary to law were agreed in the bill or in the contract, or were set by law, they apply instead.
• Someone who files late: for a request to enforce a judgment or a bill filed more than a year after it could have been filed, only shekel interest is added for the gap period (agreed linkage is preserved), and late charges only from the day it was filed.
• Reduction: the Execution Registrar may reduce interest and late charges that have accumulated in the file, after giving the creditor an opportunity to present arguments.

A business customer that pays late: the Payments to Suppliers Law

A supplier that supplies goods, a service or work in the course of its business to a customer that is a business (a licensed dealer or an exempt dealer) is entitled to payment within 45 days from the end of the month in which it submitted the invoice, unless the contract expressly set another date, and that date is needed because of the special nature of the engagement or is not exceptionally unfair (section 3(g)). Shekel interest is added to late payment, and after 30 days also late charges.

An important limit: in a transaction between two businesses, interest and late charges under this Law apply only when the customer had the upper hand in shaping the terms of the contract. The Law does not take away the supplier’s other remedies.

A debt from before 2025

The transitional provisions of Amendment No. 9 apply to an amount that, before 1 January 2025, was ordered to be paid in a decision of a court or another judicial authority, or under an enactment or agreement that applied the old law, and that has not yet been paid. If its repayment date was before 1 January 2025: until 31 December 2024, late-payment interest was added under the old law, and from 1 January 2025 shekel interest and late charges are added, and the three months for late charges are counted from 1 January 2025. If the repayment date falls on or after 1 January 2025, and it was set earlier that interest or linkage under the old law would be added to the amount: until 31 December 2024 under the old law, and from then on under the new Law. In a proceeding that was pending on 1 January 2025 and had not yet been decided, the decision is given under the new Law. (Amendment No. 9, Sefer HaHukim 3117, section 117(b)-(c))

A debt without such a decision, enactment or agreement, for example an invoice that was not paid and on which no judgment has yet been given: the decision on interest will be given under the new Law, and if the contract set interest for late payment, under the contract.

Frequently asked questions

What is “shekel interest”?

The interest that a court may award on an amount under the Adjudication of Interest and Linkage Law since 1 January 2025, and that is added under the Law after the repayment date. It is calculated for each day, is added to the principal once a year, and its rate is set every quarter by a formula in the regulations.

What is the difference between shekel interest and late charges?

Shekel interest is added from the date the court set, and in any case is added after the repayment date. Late charges are added only after the repayment date, every three months starting three months after it; they are not added to the principal, and their annual rate does not exceed 6 percentage points.

Can you demand linkage differentials and interest as before?

Not in the old format: the definition of “linkage differentials and interest” was deleted from the Law. Since 1 January 2025 the court may award shekel interest or linkage differentials; linked interest in addition to linkage, or a different rate, only when there are reasons that justify it. Linkage agreed in the contract applies, and then no linkage is awarded under the Law. (Sections 1, 2(a), 6(b))

The contract sets default interest. Does it apply?

Yes, if it is lawful. When the contract set interest for late payment, the court does not award interest under the Adjudication of Interest and Linkage Law. When the customer is an individual and the debt is credit, the Fair Credit Law limits the rate.

A business customer pays me after 90 days. Am I entitled to interest?

Under the Payments to Suppliers Law, a business pays a supplier within 45 days from the end of the month in which the invoice was submitted, unless another date was agreed in the contract that is needed because of the special nature of the engagement or is not exceptionally unfair. For late payment, shekel interest is added, and after 30 days late charges, but between two businesses only when the customer had the upper hand in shaping the contract.

What happens with a debt from 2023 that has not been paid yet?

It depends on what set the interest. It depends on what set the debt and when it had to be paid. If a judgment was given before 2025, or a law or contract applied the Adjudication of Interest and Linkage Law in its old version, and the payment date passed before 1 January 2025: until 31 December 2024 late-payment interest was added under the old law, and from 1 January 2025 shekel interest and late charges, with the three months counted from 1 January 2025. If the payment date falls on or after 1 January 2025, the old law applies until 31 December 2024 only if it was set in advance that interest or linkage under it would be added (section 117(b) of Amendment No. 9). If there is no judgment yet, the decision on interest will be given under the new Law, and if the contract set interest for late payment, under the contract. If there is no judgment yet, the decision on interest will be given under the new Law, and if the contract set interest for late payment, under the contract.