Announcement concerning Purchases with cashback service


The Central Bank of Montenegro and the Ministry of Finance of Montenegro hereby confirm that there are no regulatory obstacles to the provision of cash back service in Montenegro. The decision to implement the said service on the Montenegrin market should be brought within card payment systems of issuers and acceptors of payment services.

Cashback service allows a customer to withdraw cash as an additional service when purchasing goods using a payment card at a point of sale of merchants possessing a POS terminal. For example, if a consumer purchases goods totalling to 200 euros with a payment card in supermarket, he/she may raise a certain amount of cash (e.g. 50 euros) at the checkout counter when purchasing with his/her payment card. The consumer authorises both transactions at the same time (the purchase and money withdrawal) by entering the PIN code at the POS terminal. In this example, the amount withdrawn from the consumer's account would be 250 euros. The cashback service offers a possibility to withdraw cash in areas with insufficiently developed banking network.

Cash withdrawal within the cash back service at the merchant's point of sale is possible only in combination with the purchase of goods or services paid with a payment card. No minimum value of purchased goods is required as a condition for cash withdrawal. The rules of operation of card payment systems define the maximum amount of cash withdrawal. However, the merchant can set a lower amount than usual, with the obligation to inform the consumer.

All commercial businesses that accept cards as payment methods - shops, kiosks, supermarkets, mega markets - may provide cashback service. This does not require issuing of a special approval or license to merchants, as this service is not considered a payment service within the meaning of the Payment System Law. Merchants do have to meet additional administrative obligations to comply with VAT rules. They are also not prevented from deducting the total amount of input VAT to which they are entitled. Moreover, they do not have to calculate VAT on the amount of service fee that the merchant provides to the accepting bank.

From merchant's perspective, cashback service would mean transferring the amount of money handed over to consumers directly to merchant's account, according to the provisions of the same contract with the accepting bank for accepting cards at POS trading locations.

In this way, the merchant complies with the existing obligation under the Law on Prevention of Illegal Business. Under this Law, all legal entities and entrepreneurs (including merchants) have to deposit all the cash above the threshold (from 2,000 to 20,000 euros depending on the specific business entity's size) to their transaction accounts on 2 PM on the next business day the latest.

According to the applicable legislation, the merchant does not have to issue a fiscal invoice for cash withdrawn using this service. It is sufficient only to record the amount of cash withdrawal within the cashback service on slip snippets from the POS terminal to comply with the rules of the Regulation on Cash Registry. The printed snippet should show separately the amount of goods or services purchased, the amount of cash withdrawn using the cash back service, and the total transaction amount. The applicable regulations already require that merchants maintain one original copy of each clip from the POS terminal in their records.

To even the recorded turnover with the cash received and goods payment through the POS terminal, fiscal cash register daily reports should separate the amount of cash withdrawal from the total turnover, since it is not taxable.

Retail taxpayers are required to keep a separate record of cash withdrawal when paying out cash for cash back services.