Our net revenue includes mainly: (i) sale of goods and (ii) services, after deducting taxes and returns on sales and exchanges of goods sold.
Revenues from sales of goods are generated in all our physical stores, our e-commerce, phone sales and sales made in strategic partnerships with a major Brazilian retailer.
Sales taxes that impact this line of the income statements are ICMS, PIS and COFINS, ISS and F.T.I. (Fund for the Promotion of Tourism, Infrastructure, Services and Internalization Development of the Amazonas). For further information on the Company’s tax benefits, go to Item 7.3 of this Reference Form.
The Company has tax incentives for ICMS, PIS, Cofins, Import Tax and IPI mainly related to our production activity in the Manaus Free Zone.
The cost with goods sold is calculated based on the average acquisition cost of raw materials (gold, silver, gemstones, among others) and the products we sell. In addition, we also include freight costs as costs with goods, due to the transportation of goods from our Manaus factory to the Distribution Center (“DC”) and from the DC to our physical stores, which are included in the cost. Additionally, in the states in which we operate, for two specific product categories of our sales mix, pens and perfumes, we adopt the ICMS tax replacement system. The payment of this tax occurs in advance, at the time of purchase of the goods, based on the purchase cost and markup, set by the tax authorities of each state. The payment of this ICMS tax replacement is recorded in our inventories and affects the cost with our goods when sold. A significant part of our supplies are denominated in US dollar. For information on the effect of exchange rate changes on our results, see Item 4.1 and Item 10.2 of this Reference Form.
Our selling expenses come from operating our stores and some operating expenses of our factory. The main expenses are personnel, including salaries, commissions, social charges and benefits, advertising and marketing, e-commerce freight, rentals and condominiums, credit card commission, security and energy.
G&A expenses are incurred with management and support of operating activities. Our principal expenses include the regular activities of our distribution centers, the regular activities of our factory in the Manaus Free Zone, our São Paulo office and other corporate expenses, such as personnel expenses, including salaries, commissions, social charges and benefits for employees in administrative areas, as well as specialized consultancy, advisory services, depreciation and amortization.
Other operating revenues, net, mainly include the movement in specific civil and labor provisions and other accounts.
The financial income is the difference between financial revenues and expenses. The main accounting lines are interest expenses and charges on indebtedness, interest on credit card prepayments, income from investments and cash restatement.
The provision for income tax and social contribution is related to taxable income for the fiscal years, with the rates for retail and industry being 25% for IRPJ (Legal Entity Income Tax) and 9% for CSLL (Social Contribution).
The Company has tax incentives for IRPJ mainly related to our production activity in the Manaus Free Zone.