Brazilian crude exported to the EU received a 50pc discount on the country's 12pc export tax for cargoes sold after May, multiple sources told Argus.
The approval of the Mercosur-EU trade agreement, effective as of May, is behind the discount, the sources said. The deal has a clause that cuts any export taxes on certain Brazil products to the EU by at least 50pc.
The price impact on final cargoes could be as much as $4-5/bl.
Companies noticed the reduction when filing their tax declarations in early July. For crude cargoes sold since May, a 6pc export tax was calculated instead of the original 12pc, a source said. The retroactive effect was due to the average two-month period between deal closings and crude loadings, and tax filings, sources added.
The export tax was valid even though many Brazilian crude sellers usually sell their cargoes to international entities that then conclude their transactions with final buyers. For tax purposes, the government considers the end receivers, a source added.
Brazil implemented the export tax in March, in the days following the start of the US-Israeli war with Iran, to increase Brazil's domestic refining and guarantee domestic supply. The tax was initially due to expire in July but was extended for another 60 days.
Sources said, however, that the movement was unlikely to directly affect crude exports from Brazil, since many of the companies have taken legal action against the export tax. Additionally, lowering offers to European buyers could also impact the global price of Brazilian crude.
Brazil's trade ministry Mdic did not respond to an Argus request for comment.
