The long-awaited Provisional Measure No. 1,318/2025 (“PM”) was published last week, launching the Special Tax Regime for Data Centre Services in Brazil (“REDATA”). This regime is part of the Brazilian Data Centre Policy and is linked to Mission 4 of the New Industry Brazil Program: Digital Transformation. The aim is to increase Brazil’s capacity for storing, processing and managing data, thereby promoting the development of key areas such as cloud computing, high-performance processing and training and inferencing artificial intelligence models.
The REDATA suspends the levy of several federal taxes that would otherwise increase the final cost of equipment used in data centers: Social Contributions on Gross Revenue (“PIS/COFINS”), Excise Tax (“IPI”), and Import Tax (“I.I.”) will no longer be due on the acquisition of information and communication technology equipment, whether imported or manufactured in Brazil. This tax suspension will be converted into a zero rate once the commitments set out in the special regime have been met, and once the goods have been incorporated into the beneficiary’s fixed assets.
To qualify for REDATA, the beneficiary must invest 2% of the value of products purchased using the tax relief in research, development and innovation (“RD&I”) projects in Brazil. Additionally, they must make at least 10% of their data processing, storage, and treatment capacity available to the domestic market. For projects in the North, Northeast and Midwest regions of Brazil, these commitments will be reduced by 20%.
Another requirement for benefiting from the incentives will be compliance with strict sustainability criteria, including the use of renewable or clean energy sources and compliance with minimum water efficiency standards, the conditions for which will be detailed in regulations yet to be published.
As reported, the program has an estimated budget of R$5.2 billion in the 2026 Annual Budget Bill and has the potential to attract R$2 trillion in private investment over ten years. Furthermore, it is anticipated that the program will reduce the country’s reliance on digital services from abroad, whose tax cost tends to be much higher than those provided by Brazilian companies, from 60% to less than 10%.
The PM marks a new chapter in Brazilian industrial policy and has the potential to establish the country as a regional hub for data centers. While REDATA offers significant incentives, careful legal planning is required to ensure compliance and maximize the benefits.
We summarized the main aspects of REDATA below:
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What are the tax benefits? |
Suspension of federal taxes levied on local acquisition or importation of equipment: PIS, COFINS, IPI, and Import Tax, which, once the commitments and conditions of the special regime have been met, will be converted into a zero rate.
Note 1: The IPI suspension does not apply to goods manufactured in the Manaus Free Trade Zone (“ZFM”). Note 2: Import Tax suspension applies exclusively to goods that have no domestic equivalent or are manufactured in the ZFM.
The tax relief shall apply exclusively to products to be listed by the Federal Executive Branch. |
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Who is eligible? |
Entities with projects to install or expand data center services in Brazil (except those under the Simples Nacional regime).
Note: Data center services are those provided by infrastructure and computing resources dedicated to the storage, processing, and management of data and digital applications, including cloud computing, high-performance processing, training and inference of artificial intelligence models, and related services.
It is worth noting that companies engaged in the provision of information and communication technology products, which they manufacture themselves, either on their own initiative or by order, for incorporation into the fixed assets of a REDATA-qualified beneficiary, may be subject to the special regime.
The authorization/co-authorization must be granted by the Brazilian Internal Revenue Service, in accordance with regulations yet to be published. |
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What are the commitments? |
1. Availability for the domestic market of at least 10% of data processing, storage, and treatment capacity, which may not be exported or used for own purposes in the absence of domestic demand*;
2. Investments in Brazil, equivalent to 2% of the value of products purchased under REDATA, in RD&I projects in priority programs supporting industrial and technological development in the digital economy production chain*.
3. Compliance with the sustainability criteria and indicators, as provided for in regulations yet to be published;
4. Execution of supply or self-production contracts for electricity generated from clean or renewable sources, to meet the total demand for electricity, as provided for in regulations; and
5. Presentation of a Water Usage Effectiveness equal to or less than 0.05 L/kWh, measured annually, as provided for in regulations to be published.
*In the case of projects located in the North, Northeast, and Midwest regions of Brazil, the commitment will be reduced by 20%.
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What happens in case of non-compliance with the commitments? |
The beneficiary will be required to pay the suspended taxes, plus interest and late payment penalties.
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How long are the benefits valid for? |
Five years, with limited application until December 31, 2026, for taxes that will be extinguished with the consumption tax reform (PIS/COFINS/IPI). Although the PM has not clearly defined this, the expectation is that, according to a statement by the Federal Government, REDATA will include the new taxes created by the tax reform, thus maintaining the commitment to encourage and develop the technology sector.
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