What is a settlement transaction?

A settlement transaction is not just a transfer of money from a client to a business owner. It is a legally defined action, the correctness of which determines the legality of the company’s operations, its tax burden, and protection from penalties. For businesses, it is also a matter of trust with clients and partners.

In this article, we will look at what settlement transactions are, who is required by law to conduct them, and what consequences await those who ignore the established rules.

What is a settlement transaction?

A settlement transaction is the process of accepting cash, bank cards, checks, tokens, or other means of payment from a buyer at the point of sale of goods or services. It also includes refunds in the event of a customer’s refusal to purchase or failure to provide a service.

For a transaction to be considered a settlement transaction and subject to fiscalization requirements, it must meet the following criteria:

• There must be a settlement between the buyer and the seller in the form of cash, non-cash payment by bank card, payment check, token, or similar means of payment.
• It must take place at a specific location where the goods or services are received, as well as at the point where payment is made or prepaid goods are delivered.
• It must include not only the sale process, but also cases of return of goods or refusal of services, when funds are returned to the buyer.

📍 What is considered the place of settlement?

The place of settlement is considered to be:

• The location where payment for goods or services is made, as well as where cash received from sales is stored.
• The point of receipt by the buyer of goods or services for which payment was made in advance using a card, payment check, token, or similar means of payment.

Regulatory framework for settlement transactions

All financial relations between businesses and customers are governed by clear rules. For entrepreneurs, this is not just a “formality,” but a legal foundation on which the legality of their activities, transparency of accounting, and protection from penalties depend.

Why is Law No. 265 so important for business?

The main document is Law of Ukraine No. 265/95-VR dated July 6, 1995, “On the Use of Cash Registers in Trade, Public Catering, and Services.”

It defines:

• what a settlement transaction is and how it should be carried out;
• the obligation to fiscalize both cash and non-cash payments;
• areas of activity where the use of cash registers is mandatory;
• options for fiscalization tools — classic cash registers or software cash registers (PRRO), introduced in 2020;
• exceptions for certain categories of entrepreneurs (calculation books, income limits set by the CMU);
• liability for violations of settlement rules and the powers of regulatory authorities.

CMU Resolution No. 894: focus on cashless payments

Another key document is Resolution No. 894 of the Cabinet of Ministers of Ukraine. It obliges all merchants to provide customers with the option of paying by card, through payment apps, or terminals.

The main difference is that while Law No. 265 regulates the fiscalization of transactions, Resolution No. 894 establishes technical requirements: businesses must have equipment or software solutions that allow buyers to pay cashless.

How does this system work together?

• Law No. 265 → defines the legal nature of settlement transactions and requires them to be carried out through cash registers or payment terminals.
• Resolution No. 894 → guarantees that customers will always have a choice: to pay in cash or by card.

Together, they form a transparent and controllable system that is beneficial to the state (tax control), businesses (protection from fines), and customers (convenience and trust).

What financial transactions are considered settlement transactions?

Settlement transactions include all actions related to the receipt and disbursement of funds in the course of economic activity. The law and practice distinguish the following key cases:

1. Sale of goods in retail trade. Payment in cash or by card in a store, supermarket, pharmacy, or any other retail outlet.
2. Provision of services. Payment for the services of beauty salons, workshops, cleaning companies, carriers, etc.
3. Public catering. Payment in cafes, restaurants, canteens, coffee shops.
4. Online shopping. Paying online through banking services, payment systems, or cash on delivery when you get your stuff.
5. Cash withdrawals. Getting money back for stuff you returned or services you didn’t get.
6. Electronic money transactions. Payments via electronic payment systems, which are equivalent to cash payments.

Thus, all actions involving the movement of funds between the seller and the buyer in any form are considered settlements.

Who performs settlement transactions?

Settlement transactions are performed by all business entities that sell goods or provide services to individuals, regardless of the form of ownership or size of the business. These may include:

• Individual entrepreneurs (IE). Most often, microbusinesses in the field of trade and services.
• Legal entities. Shops, supermarkets, pharmacies, service companies.
• Online stores and online platforms. Including marketplaces that organize sales and accept payments.
• Catering establishments. Restaurants, cafes, bars.
• Transport and service companies. Taxis, delivery, courier services.

There are exceptions for certain categories of single tax payers, but from 2022, the obligation to use cash registers/payment terminals has been significantly expanded.

Possible penalties for violating the rules

Failure to comply with the requirements for conducting settlement transactions may result in financial and administrative liability. The main penalties are provided for by Law No. 265/95-VR and the Tax Code of Ukraine:

• For failure to conduct a settlement transaction through a cash register/payment terminal. A penalty of 100% of the value of goods (services) sold, and for a repeat violation within a year — 150%.
• For failure to issue a settlement document. The same penalty of 100% of the value of goods (services) sold is provided, and for a repeat violation within a year — 150%.
• For using an unregistered cash register/payment terminal. A fine of UAH 5,100.
• For violating the rules for storing fiscal reports. From UAH 510 to UAH 1,020.
• Administrative liability of officials. Fines from UAH 85 to UAH 340 for violations in the field of cash settlements.

It is worth remembering that the tax service actively conducts inspections, especially in the areas of trade and public catering, where there are frequent cases of concealment of revenue. Therefore, the correct conduct of settlement operations is not only a formality, but also a guarantee of avoiding significant financial losses.

Conclusion

A settlement transaction is a basic element of any economic activity that determines the transparency and legality of relations between a business and a consumer. Not only the reputation of an entrepreneur, but also tax obligations and financial security of a business depend on the correctness of its conduct.

Timely fiscalization, correct operation of cash registers/payment terminals, and issuing receipts to buyers are steps that help avoid penalties and ensure stable business development within the legal framework.