Natura Cosméticos SA, in compliance with the provisions of CVM Instruction (Securities Commission) and in line with the best practices of corporate governance, clarified yesterday in a press release that the news published today by the newspaper Valor Econômico “Beauty sector loses in the CARF millionaire dispute on IPI, “as part of the tax assessment against the Indústria e Comércio de Cosméticos Natura Ltda., a subsidiary of the Company, in December 2012, related to the 2008 generator events, on the grounds that the basis of calculation of the Tax on Products IPI in sales destined to the Company would be incorrect, the Administrative Council of Tax Appeals (CARF) pronounced, yesterday, a decision maintaining the fiscal requirement.

Economic newspaper Valor Econômico has published that beauty companies began to lose a dispute over IPI in the Administrative Council of Tax Appeals , which due to the reformulation of the body in 2015, the Federal Revenue has won three lawsuits – among them Natura, the other two would be Avon and Delly Kosmetic on the grounds that “manufacturers have established very low values for their products in order to reduce the tax payable.

According to information from the newspaper, the divergence between the taxpayers and the IRS is in the concept of the “praça” (commercial area). “For surveillance, praça is a commercial concept, which considers the price practiced by the wholesale market for the IPI calculation base. For companies, the “praça” is limited to the municipality of the sender, which is usually the manufacturer. Thus, the basis of calculation would be the manufacturer’s cost price added to the profit margin. ”

Natura clarifies that the decision of the CARF is not yet the final and that it will appeal to the Superior Chamber of Tax Appeals (CSRF). If the decision is maintained at the administrative level, the Company will submit the discussion to the Judicial Branch.

“Natura reaffirms its understanding that the IPI was collected in strict compliance with tax legislation and that its lawyers continue to classify the likelihood of loss as remote, which is why no accounting impact is expected as a consequence of that decision,” said company in the comunicate signed by João Paulo Brotto Gonçalves Ferreira, president, financial and investor relations director.

The adjusted value of the lawsuit, as of December 31, 2017, is R $ 925.2 million. The cases of Delly Kosmetic Trade and Industry and Avon were judged in the same vein. According to the newspaper, tax assessments of R $ 37.5 million and R $ 803.9 million were maintained respectively.