App Store - Refund when a user upgrades a subscription on app store?

When a user upgrades, do they

1. receive an actual refund for the unused portion of their original sub in their original form of payment and then charged the full amount of the upgrade?

OR

1. the unused amount of the original sub is applied to the upgrade subscription?

example: Original - $100 90% of the time is unused when they upgrade, which costs $200.

1. is $90 refunded to the user in their bank account and then the user charged $200?
2. the $90 is credited to the upgrade purchase and the user is charged $110 ($200 - $90)