Brazil Retail Federal Import Tax Elimination

Brazil is eliminating the 20% federal import tax on cross-border purchases under US$50, reducing the total tax burden to ~20%. This poses downside risks to domestic retailers LREN and CEAB, though the impact may be partially priced in.

Key Takeaways

• 1.Brazil's federal government is eliminating the 20% federal import tax on cross-border products valued below US$50, effective May 13.
• 2.The total tax burden on these small imports will drop from approximately 45% to roughly 20%, as state-level ICMS taxes remain.
• 3.Revenue at risk for domestic retailers Lojas Renner (LREN) and C&A Modas (CEAB) is estimated at 1-3% and 1-4% respectively.

Table of Contents

• The news
• Lower taxation could boost cross-border sales
• Sizing the potential negative impact for domestic apparel retailers
• Improvements in value proposition as a mitigating factor
• Valuation methodology and key risks
• Disclosure Appendix
• Price target and rating history chart(s)
• Target price history table(s)
• Regulatory disclosures
• Global product; distributing entities
• General disclosures

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