Refund to the buyer: is it possible to return cash for payment by card and vice versa?

Funds must be refunded to the buyer using the same payment method used for the original transaction. If the product was paid for in cash, the refund must be made in cash. If the buyer paid by bank card through a POS terminal or online acquiring, the funds must be refunded by bank transfer through the bank or acquiring system. If the payment was received as a standard bank transfer using IBAN details, the refund must also be made by bank transfer.

An agreement with the buyer may change the refund period, but it does not convert a cash transaction into a cashless transaction or vice versa. Part three of Article 9 of the Law of Ukraine «On Consumer Rights Protection» allows the parties to agree on another refund period of up to seven days if the funds cannot be returned on the day the contract is terminated. It does not allow the parties to arbitrarily change the payment method. The State Tax Service directly states that cash cannot be refunded for a product paid for by card.

Why the refund method must match the payment method

Law No. 265/95-VR defines a settlement transaction separately for cash and card payments:

• for a cash payment, a refund means issuing cash to the buyer;

• for a bank card payment, the refund is documented as the transfer of funds to the buyer’s bank.

Therefore, a card payment and a cash refund are not corresponding transactions. They create discrepancies between the fiscal receipt, bank acquiring, cash register and accounting records.

Practical rule for the seller:

Can an agreement with the buyer change the refund method?

No. The wording concerning an «agreement between the parties» in Articles 8 and 9 of the Law «On Consumer Rights Protection» concerns the deadline for fulfilling the monetary obligation.

For goods of proper quality, the funds must be refunded on the day the contract is terminated. If the funds cannot be refunded on that day, the parties may agree on another period, but no longer than seven days. The same rule applies when a contract is terminated in the cases provided for by Article 8 concerning defective goods.
The law contains no provision under which a written request from the buyer allows the seller to:

• issue cash instead of refunding funds to the card;

• transfer to a card funds that were received in cash;

• refund funds to another person’s account;

• replace the bank transaction with an entry in the internal accounting system.

A buyer’s application is a useful supporting document, but it does not override the requirements of legislation governing ECRs, cash transactions and payment services.

When the buyer is entitled to request a refund

The refund method does not itself create the right to a refund. The seller must first establish whether the buyer has a legal or contractual basis for terminating the contract.

Goods of proper quality

Under Article 9 of the Law «On Consumer Rights Protection», a consumer is entitled to exchange a non-food product of proper quality within 14 days, excluding the day of purchase, provided that:

• the product has not been used;

• its appearance and consumer properties have been preserved;

• seals and labels have been preserved;

• a paper or electronic settlement document is available.

A refund is a lawful requirement if an equivalent product is not available for sale and the consumer decides to terminate the contract. The seller may also voluntarily introduce more favourable return conditions for buyers, but they must not restrict the minimum rights established by law.

Certain goods of proper quality cannot be exchanged or returned. The current list includes, in particular, food products, medicinal products, personal hygiene items and other categories specified by Resolution No. 172 of the Cabinet of Ministers of Ukraine. This restriction applies specifically to goods of proper quality and does not release the seller from responsibility for defective goods.

Defective goods

The existence of any defect does not always automatically entitle the buyer to request a refund. Depending on the nature of the defect, the consumer may request:

• a proportional reduction in the price;

• the defect to be remedied free of charge;

• reimbursement of expenses incurred to remedy the defect.

Termination of the contract and a refund of the product price are permitted, in particular, in the event of a substantial defect or product falsification, subject to the conditions established by Article 8 of the Law. For a food product that is unfit for consumption, the seller must replace it with a suitable product or refund the amount paid.

Online store and distance selling

Contracts concluded remotely are subject to the special provisions of Article 13 of the Law. As a general rule, the consumer is entitled to terminate a distance contract within the period established by law, except for the specified exclusions. Where the right to terminate applies, the seller must refund the funds no later than 30 days after receiving the consumer’s notice. The law also regulates expenses related to returning the product.

An online store should publish in advance:

• the address and procedure for accepting returns;

• the period for reviewing requests;

• the method for returning the product to the seller;

• the refund procedure;

• the list of documents the buyer must provide;

• the rules for reimbursing delivery costs.

The terms published on the website cannot deprive the consumer of rights expressly established by law.

The buyer is a Sole Proprietorship or legal entity

The Law «On Consumer Rights Protection» protects an individual who purchases products for personal needs unrelated to business activities.

If the product was purchased by a Sole Proprietorship or legal entity for business purposes, the possibility of returning it is determined by the contract, the Civil Code of Ukraine and the supply documents. At the same time, the fiscalisation rules and the requirement for the refund method to match the original payment method continue to apply if the transaction falls within the scope of Law No. 265.

Special refund situations

The buyer has lost the card

The loss, blocking or reissuance of a card is not a reason to issue a cash refund.

The seller must process the refund through the acquiring bank or payment service. The buyer may need to contact the bank to clarify how the funds will be credited to the account after the payment instrument has been blocked or reissued.

The buyer should not be asked to provide another person’s card or the full card number together with the CVV code. The refund must be processed using the refund transaction provided by the bank, rather than as an ordinary transfer using details received through a messenger.

The buyer’s account or card has been closed

The seller must contact the acquiring bank or payment service and obtain instructions for the specific transaction. Independently replacing a cashless refund with a cash payment creates tax and cash-handling risks.

It is recommended to retain:

• the buyer’s request;

• the response from the bank or payment service;

• confirmation of the attempted refund;

• a document confirming that the funds were credited or that the transaction was rejected.

The buyer asks for the funds to be transferred to a relative’s card

Such a refund creates a risk of paying the funds to an unauthorised person. The safer procedure is to refund the funds to the payer or to the buyer’s bank account identified in the original transaction or confirmed by appropriate documents.

The buyer’s application alone does not eliminate the risk of a duplicate claim, a dispute regarding the recipient of the funds or claims from the bank.

Partial return of goods

If the buyer returns part of the purchase, the actual cost of the corresponding product items must be refunded, taking into account the discounts applied during the sale.

The seller must:

1. identify the original receipt;

2. select the products and quantities being returned;

3. determine the portion of the payment attributable to those products;

4. generate a fiscal refund receipt;

5. perform the cash or bank transaction using the appropriate method.

If one receipt was paid using several payment methods, the internal regulations should establish a consistent procedure for allocating the refund between the original payment methods.

There is insufficient cash in the cash register

A shortage of funds in the ECR cash drawer does not allow the seller to refuse a lawful refund.

For an enterprise, the funds may be issued from the main cash office under a cash disbursement order and deposited into the ECR cash drawer using the «service deposit» transaction. A Sole Proprietorship that does not maintain a cash book may also deposit the required cash into the drawer using the «service deposit» transaction. A negative amount is then registered and an ФКЧ-2 receipt is issued.

Payment by bank transfer using IBAN

If the buyer transferred the funds directly from one bank account to another and the transaction was not a settlement transaction within the meaning of Law No. 265, the refund must be made through the bank without using an ECR or pECR.

The State Tax Service directly states that if payment was made in cashless form through a banking institution, the refund must also be processed through the bank and an ECR is not used.

At the same time, a card payment made through a POS terminal or online acquiring is not treated as an ordinary IBAN bank transfer for ECR purposes.

How to process a refund through an ECR or pECR

If the original transaction was processed through an ECR or pECR, the seller must register the refund and provide the buyer with a settlement document for the full amount of the transaction.

Fiscal refund receipt

The refund is documented with a fiscal cash receipt for the disbursement of funds using Form No. ФКЧ-2. It is generated by an ECR or pECR in paper or electronic form.

The ФКЧ-2 receipt is used not only for the actual issue of cash, but also for properly documenting a refund settlement transaction, including a cashless refund. It must specify the correct payment method.

A document issued by the bank terminal does not replace the fiscal receipt. A card refund requires two interconnected actions:

1. processing the refund transaction through the bank or acquiring system;

2. registering the fiscal refund receipt through the ECR or pECR.

Refund through a classic ECR

The disbursement of funds is registered as a negative amount. The «reversal» transaction must not be used for this purpose.

If the amount refunded through a classic ECR exceeds UAH 100, the responsible employee must prepare a cash disbursement statement. The statement must include:

• the details of the document identifying the buyer;

• information about the product or service;

• the refund amount;

• the number, date and time of the original settlement document.

The statement must be retained for three years and provided to the supervisory authority during an inspection. Such a statement must also be prepared when cancelling an incorrectly entered amount or an incorrectly selected payment method through a classic ECR.

The requirement of paragraph 8 of Section III of Procedure No. 547 is formulated for classic ECRs. For a pECR, the main mandatory confirmation of the refund is a properly registered fiscal refund receipt. An internal statement or buyer’s application may additionally be used for control purposes, but does not replace the fiscal document.

Refund through a pECR

In a pECR, the refund should be created on the basis of the original sales receipt. The refund method must match the payment method specified in the original receipt. After the actual refund transaction is completed, the receipt must be registered on the fiscal server of the State Tax Service.

If the enterprise uses several cash registers, it must ensure that the original settlement document can be identified. The State Tax Service permits a refund through another classic ECR only if the original receipt is identified and a negative amount is registered.

Which documents the seller should retain

The set of documents depends on the reason for and method of the refund.

Mandatory documents or documents directly required by law

• the original paper or electronic settlement document;

• the ФКЧ-2 fiscal refund receipt, if the refund constitutes a settlement transaction;

• a cash disbursement statement for refunds exceeding UAH 100 in the cases established for classic ECRs;

• a bank document, slip receipt or electronic confirmation from the acquirer;

• a payment instruction for a bank transfer;

• a document confirming that the returned product was accepted and recorded in inventory.

Documents that should be included in the internal regulations

• the buyer’s application;

• an acceptance and transfer statement or return invoice;

• a conclusion regarding the condition of the product;

• a decision by the responsible person to approve the request;

• correspondence with the bank in a non-standard situation;

• confirmation that the electronic receipt was sent to the buyer;

• a document confirming delivery costs, if they are subject to reimbursement.

The buyer’s application should specify:

• full name;

• contact details;

• the date and number of the purchase;

• the product and quantity;

• the reason for the request;

• the amount;

• the original payment method;

• bank account details, if the refund is made by bank transfer;

• the date and signature.

The application must not contain the card’s CVV code, PIN, online banking password or any other information that the seller does not need.

Buyer’s personal data

Refund documents may contain the buyer’s full name, telephone number, bank details and identity document details.

The seller must:

• collect only the data required for the specific refund;

• use the data only to process the refund, maintain records and fulfil legal obligations;

• restrict employee access to such documents;

• establish a retention period and storage procedure;

• not disclose the data to third parties without a lawful basis.

If identity document details are required for a statement under Procedure No. 547, it is sufficient to record the required details. Copying every page of a passport without a specific need creates a risk of excessive personal data processing.

Accounting and tax treatment of refunds

The return of goods must be simultaneously recorded:

• in inventory records;

• in the cash register or bank account;

• in settlements with the buyer;

• in income and expenses;

• in tax records.

After accepting the product, the seller must record its return to inventory or separately record that it is unsuitable for further sale. The seller must not simply refund the money while leaving the product recorded as sold.

Single tax

Subparagraph 5 of paragraph 292.11 of the Tax Code excludes from the income of a single-tax payer funds refunded to the buyer due to:

• the return of goods;

• termination of the contract;

• the buyer’s application for a refund.

If the income has already been declared in a previous reporting period, the adjustment must be reflected in accordance with the rules applicable to the relevant taxpayer category and tax return form.

VAT

When goods or an advance payment are returned, or the amount of compensation changes, a VAT payer must adjust the VAT liabilities and input VAT in accordance with Article 192 of the Tax Code.

Depending on the buyer’s status and the direction of the adjustment, it may be necessary to:

• prepare an adjustment calculation for the VAT invoice;

• register it in the Unified Register of VAT Invoices;

• reflect the adjustment in the VAT return.

A fiscal refund receipt does not replace an adjustment calculation for the VAT invoice.

Liability for incorrect processing

Violations of ECR and pECR requirements

For failing to process a settlement transaction, processing it for less than the full amount or failing to issue the required settlement document, paragraph 1 of Article 17 of Law No. 265 provides for financial penalties:

• 100% of the transaction amount — for the first violation;

• 150% of the transaction amount — for each subsequent violation.

Officials and employees who process settlements may also be subject to administrative liability.

Violation of consumer rights

For refusing to exercise the consumer rights established by Articles 8 and 9 of the Law «On Consumer Rights Protection», Article 23 provides for a fine equal to ten times the price of the product, but not less than five tax-free minimum individual incomes.

The consumer may also request a refund, compensation for losses and moral damages, and may apply to a court.

Licences and permits

No separate licence is required to process a return of goods or a refund. Licensing requirements depend on the type of product or activity, not on the method used to refund the funds.

For licensed or regulated activities, systematic violations of consumer rights may provide grounds for the supervisory authority to apply to the authority that issued the permit to temporarily suspend or prematurely revoke it.

The new Law of Ukraine «On Consumer Rights Protection» No. 3153-IX has not yet entered into force. It will take effect no earlier than the termination or cancellation of martial law. Therefore, until it enters into force, Law No. 1023-XII applies.

Practical example

A buyer ordered a product from an online store and paid UAH 5,000 by card through a POS terminal. Before receiving the product, the buyer cancelled the order and requested a cash refund.

Correct actions for the seller:

1. record the cancellation of the order;

2. find the original fiscal receipt;

3. process the refund through the acquiring bank to the buyer’s bank account;

4. generate an ФКЧ-2 fiscal refund receipt specifying the cashless payment method;

5. provide the buyer with an electronic or paper receipt;

6. retain confirmation of the bank transaction.

The seller cannot issue UAH 5,000 in cash, even if the buyer submits a written application requesting it. The State Tax Service considers this exact situation in its Public Information and Reference Resource and states that a business entity is not entitled to issue a cash refund for a card payment.

Refunds through an ECR/pECR and bank terminal in Torgsoft

Torgsoft provides tools for processing product returns, recording the movement of funds and printing refund receipts. For a cashless refund, the relevant settlement account can be selected. If a connected bank terminal is available, the transaction can be sent to the terminal. If a direct connection to the terminal is not used, the software allows the details of the completed bank transaction to be entered manually.

For certain terminal models and bank protocols, refunds require special configuration. For example, Ingenico terminals may require separate merchant IDs for payment and refund transactions or a change to the refund mode by the bank. The configuration must be agreed with the acquiring bank so that the transaction in Torgsoft corresponds to the actual bank transaction.

Torgsoft supports printing fiscal refund receipts, working with a pECR and displaying bank terminal slip receipt information in the fiscal document template. Torgsoft Hybrid provides sales and refund modes. However, refunds cannot be created in offline mode — a connection to the server is required. Technical limitations described in the software documentation may apply to NFC payments or multiple separate terminal transactions.

Store refund regulations

To reduce risks during inspections and disputes with buyers, the enterprise should approve an internal procedure under which the employee:

1. verifies the grounds for the return;

2. identifies the original sale;

3. determines the original payment method;

4. accepts the product and checks its condition;

5. prepares a return invoice or statement;

6. performs the bank or cash transaction using the original payment method;

7. generates a fiscal refund receipt;

8. provides the receipt to the buyer;

9. retains the application, bank documents and fiscal documents;

10. records the transaction in inventory, accounting and tax records.

Employees must be prohibited from:

• issuing cash for a card payment;

• refunding funds to a third party’s account without an appropriate legal basis;

• processing a refund only in the accounting software without completing the actual bank or cash transaction;

• replacing the fiscal receipt with a terminal slip receipt;

• storing buyers’ PINs, CVV codes or passwords;

• changing the payment method in the receipt solely to reconcile cash or reporting records.

Official sources

1. Law of Ukraine «On Consumer Rights Protection» dated 12 May 1991, No. 1023-XII
   Key provisions: Articles 8, 9, 13, 22, 23 and 28.
   https://zakon.rada.gov.ua/go/1023-12

2. Law of Ukraine «On the Use of Registrars of Settlement Transactions in Trade, Catering and Services» dated 6 July 1995, No. 265/95-VR
   Key provisions: Article 2, paragraphs 1 and 2 of Article 3, and Articles 15 and 17.
   https://zakon.rada.gov.ua/go/265/95-%D0%B2%D1%80

3. Order of the Ministry of Finance of Ukraine dated 21 January 2016, No. 13, «On Approval of the Regulation on the Form and Content of Settlement Documents/Electronic Settlement Documents»
   Key provisions: Section III, Form No. ФКЧ-2.
   https://zakon.rada.gov.ua/go/z0220-16

4. Order of the Ministry of Finance of Ukraine dated 14 June 2016, No. 547, «On Approval of Procedures for the Registration of Registrars of Settlement Transactions and Settlement Transaction Record Books»
   Key provisions: paragraphs 7 and 8 of Section III of the ECR Application Procedure; the pECR application procedure.
   https://zakon.rada.gov.ua/go/z0918-16

5. Tax Code of Ukraine dated 2 December 2010, No. 2755-VI
   Key provisions: Article 192 and subparagraph 5 of paragraph 292.11 of Article 292.
   https://zakon.rada.gov.ua/go/2755-17

6. Resolution of the Cabinet of Ministers of Ukraine dated 19 March 1994, No. 172
   Key provision: the list of goods of proper quality that cannot be exchanged or returned.
   https://zakon.rada.gov.ua/go/172-94-%D0%BF

7. Law of Ukraine «On Personal Data Protection» dated 1 June 2010, No. 2297-VI
   Key provisions: Articles 6, 8 and 24.
   https://zakon.rada.gov.ua/go/2297-17

8. Law of Ukraine «On Consumer Rights Protection» dated 10 June 2023, No. 3153-IX
   Key provision: the procedure for entry into force.
   https://zakon.rada.gov.ua/go/3153-20

9. Public Information and Reference Resource of the State Tax Service: cash refunds for goods paid for by bank card
   https://zir.tax.gov.ua/main/bz/view/?id=39634&src=ques