Brazil implements Redata tax regime for data centers

Brazil has enacted the Redata law, establishing a Special Tax Regime for Data Center Services to boost digital infrastructure and attract international investment. The law provides federal tax suspensions and reductions on equipment, including Import Tax, IPI, PIS, and Cofins. In exchange, companies must dedicate at least 10% of their processing capacity to the Brazilian market or public institutions and invest 2% of their funds into national scientific research.

To qualify, data centers must source 100% of their energy from renewable or low-emission sources. This requirement has sparked debate, with governors from Amazonas and Sergipe advocating for the inclusion of natural gas as a low-emission option to prevent investment concentration in regions with established electrical grids.

While Redata addresses federal taxes, ICT entities are now petitioning Confaz to reduce state-level ICMS taxes, which account for approximately 64% of the tax burden on data center capital expenditures. Industry leaders argue that state-level tax coordination is essential to ensure Brazil remains competitive in the global race for artificial intelligence and cloud computing infrastructure.