A law creating Brazil's Redata, the Special Taxation Regime for Data Center Services, took effect this week. The regime suspends federal taxes for companies that build or expand data centers in the country. Sanctioned on September 15 by President Luiz Inácio Lula da Silva, the law was approved by the Senate on September 1 after moving through Congress as bill 278/2026, according to the Finance Ministry, which frames the program as part of its low-carbon economy agenda.
Brazil has about 200 data centers, and 60% of Brazilians' data is stored outside the country, according to the ministry. Artificial intelligence has raised demand for capacity and the sector's costs: according to industry estimates reported by g1, the structure of a standard AI data center costs an average of US$ 1 billion, with equipment, the most expensive part of the project, at US$ 4 billion to US$ 5 billion. "Any video we watch, when we make a Pix transaction, for example (...) it is because there is a data center like this one supporting the entire operation," Marcos Siqueira, a vice president of a data center company, told Jornal Nacional, Globo's flagship newscast. Pix is Brazil's instant payment system.
How the incentives work
Redata suspends, for five years, the Import Tax, the IPI (a federal excise tax on industrialized products) and PIS/Cofins contributions on purchases, in Brazil or abroad, of electronic components and information and communication technology goods. According to the trade publication Capacity, IPI rates on these products range from 5% to 30% depending on the tariff code and exceed 300% on specific items; on imported goods, PIS and Cofins add up to 11.75%. Joining the regime requires Finance Ministry approval and being current on federal taxes. The program originated in a provisional decree issued in May 2025, withdrawn from Congress in February 2026 and resubmitted as a bill with the same content, Capacity reported. The Chamber of Deputies approval projected R$ 7 billion in tax expenditures over three years.
"It is 26% more expensive to install a data center in Brazil than an investment of the same size in the United States. With the approval of Redata, this disadvantage falls to 17%," said Tatiana Ribeiro, executive director of the Movimento Brasil Competitivo competitiveness group, quoted by g1.
Conditions and risks
The benefits come with conditions. Companies must cover their full contracted electricity demand through supply contracts or self-generation from renewable or low-emission sources such as solar, wind and hydro; meet a water efficiency standard of up to 0.05 liter of water per kWh for equipment cooling; direct at least 10% of their processing, storage and data handling supply to the domestic market; and invest in Brazil the equivalent of 2% of the value of goods bought with the tax break, including research with Brazilian universities and companies and reserved capacity for national institutions. Energy use is the main concern: a standard AI data center can consume up to 15 times more energy than a conventional center of the same size, g1 reported.
"We have the possibility of, by 2030, quadrupling or quintupling the installed base of data centers in Brazil," Luís Tossi, vice president of the Brazilian Data Center Association, told g1. The installed base is currently around 1 gigawatt of IT load, and between 90% and 95% of centers already built in the country use closed-circuit cooling, which consumes no water, a technology that is also the standard in new projects, he said.
For operators and equipment makers, the regime cuts the capital cost of projects; for power sellers, it opens a long-term market in clean sources. On the other side are consumers of digital services, from Pix to streaming, who may gain installed capacity in the country and less dependence on servers abroad, and taxpayers, who fund the estimated R$ 7 billion in tax expenditures over three years. "Without it, development will continue, but at a slower pace," Elena Winters, vice president of international business at Elea Data Centers, told Capacity in February.