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COMMITMENTS AND CONTINGENCIES | 6 Months Ended
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Jun. 30, 2025
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation and Other Legal Matters The Company is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues liabilities when it considers that future costs will probably be incurred and such costs can be reasonably estimated. Proceeding-related liabilities are based on developments to date and historical information related to actions filed against the Company. As of June 30, 2025, the Company had accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of $161 million (net of judicial deposits) within non current other liabilities to cover legal actions against the Company for which Management has assessed the likelihood of a final adverse outcome as probable. Expected legal costs related to litigations are accrued when the legal service is actually provided. In addition, as of June 30, 2025, the Company and its subsidiaries are subject to certain legal actions considered by the Company’s Management and its legal counsels to be reasonably possible of resulting in a loss for an estimated aggregate amount up to $380 million. No loss amounts have been accrued for such reasonably possible legal actions. For further information related to contingent liabilities please refer to Note 16 to the consolidated financial statements in the Company’s 2024 10-K. Tax Claims Interstate rate of ICMS-DIFAL on interstate sales Interstate rate of ICMS-DIFAL on interstate sales without Complementary Law The writ of mandamus related to the interstate rate of ICMS-DIFAL (Imposto sobre Circulação de Mercadorias, Serviços de Transporte Interestadual, Intermunicipal e Comunicação on interstate sales at a differential rate) without the existence of a complementary law is described in Note 16 to the consolidated financial statements in the Company’s 2024 10-K. In June 2025, the Superior Court of Justice ruled against the Company on the Special Appeal relating to one of the cases related to the Distrito Federal (where the risk of losing had been considered probable). The case will be closed following withdrawal by the State of the funds previously required to be deposited by the Company (which amount to less than $1 million as of June 30, 2025). The other cases pending as of December 31, 2024 had no updates during the six-month period ended June 30, 2025. The Company maintains a $2 million provision as of June 30, 2025 for the disputed amounts related to the three ongoing cases where the risk of losing is considered by Management to be probable, based on the opinion of external legal counsel, which are presented net of the corresponding judicial deposits of $2 million. Exclusion of ICMS tax benefits from federal taxes base The tax claims related to the exclusion of ICMS tax benefits from the tax base of the Corporate Income Tax (“IRPJ”) and of the Social Contribution on Net Profits (“CSLL”) and the federal contributions PIS and COFINS is described in Note 16 to the consolidated financial statements in the Company’s 2024 10-K. On April 4, 2025, the case related to the exclusion of ICMS tax benefits in the the tax base of IRPJ and CSLL prior to the enactment of Law 14,789 (up to December 2023), whose risk of losing was deemed not more likely than not, became final and unappealable in favor of the Company. The Company had recorded a corresponding income tax benefit arising from the ICMS tax incentives from September 2021 up to December 2023, which amounted to $38 million considering the exchange rate as of June 30, 2025. In June 2025, regarding the writ of mandamus filed to set aside the federal contributions PIS and COFINS under Law 14,789 (from January 2024 onwards), the Company was granted an injunction to suspend the inclusion of presumed ICMS credits in the PIS and COFINS calculation basis, setting aside the effects of Law 14,789/2023. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is possible but not probable based on the technical merits of the Company’s tax position. Accordingly, the Company has not recorded any expense or liability for the disputed amounts. As of June 30, 2025, the total disputed amount was $16 million. Buyer protection program The buyer protection program (“BPP”) is designed to protect buyers in the Marketplace from losses due primarily to fraud or counterparty non-performance for all transactions completed through the Company’s online payment solution Mercado Pago (except for certain excluded categories). The Company’s BPP provides protection to consumers by reimbursing them for the total value of a purchased item and the value of any shipping service paid if it does not arrive, arrives incomplete or damaged, does not match the seller’s description or if the buyer regrets the purchase. The Company is entitled to recover from the third-party carrier companies performing the shipping service certain amounts paid under the BPP. Furthermore, in some specific circumstances, the Company enters into insurance contracts with third-party insurance companies in order to cover contingencies that may arise from the BPP. The maximum potential exposure under this program is estimated to be the volume of payments on the Marketplace, for which claims may be made under the terms and conditions of the Company’s BPP. Based on historical losses to date, the Company does not believe that the maximum potential exposure is representative of the actual potential exposure. The Company records a liability with respect to losses under this program when they are probable and the amount can be reasonably estimated. As of June 30, 2025 and December 31, 2024, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is $6,500 million and $5,769 million, respectively, for which the Company recorded a provision of $13 million and $14 million, respectively. Commitments The Company has committed to purchase cloud platform and other technology services for a total minimum aggregate purchase commitment of $3,198 million. As of June 30, 2025, the remaining purchase commitment is $2,777 million. The Company has signed a 10-year agreement with Gol Linhas Aereas S.A. under which the Company is committed to contract a minimum amount of air logistics services for a total cost of $331 million (portion allocated to the services component of the agreement). As of June 30, 2025, the remaining purchase commitment is $263 million. Since October 2023, the Company has signed 3-year agreements with certain shipping companies in Brazil, under which the Company committed to contract a minimum amount of logistics services for a total cost of $55 million. As of June 30, 2025, the remaining commitment amounted to $35 million. As of June 30, 2025, the Company has lease agreements for new warehouses in Brazil, Mexico and Argentina, for a total amount of $1,333 million, that have not yet commenced. Lease terms under the agreements are between 3 to 15 years. The Company has unconditional purchase obligations related to capital expenditures for a total amount of $34 million. As of June 30, 2025, the remaining purchase commitment is $11 million.

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