Brazil's Senate approved on Tuesday (Sept. 1) a bill creating Redata, a special federal tax regime meant to attract data centers to the country. The vote was symbolic. The bill now goes to President Luiz Inacio Lula da Silva for his signature. Data centers are the facilities that store and process data, including cloud services and the training of artificial intelligence models.
According to Folha de S.Paulo, the vote was the first test of the deal between Lula and Senate President Davi Alcolumbre, which also unlocked the end of the 6x1 shift schedule and a legal framework for critical minerals. The bill was introduced by the government's leader in the Chamber of Deputies, José Guimarães, and replaced a provisional measure issued by the federal government, according to news site g1. A provisional measure is an emergency act that expires unless Congress turns it into law.
What the regime grants
Qualified companies stop paying the federal contributions PIS/Pasep and Cofins, including their import versions, plus the IPI industrial tax and the Import Tax on electronic components and information technology goods, according to InfoMoney. The benefits last five years. News site g1 reports the bill also zeroes taxes on the export of services in the sector. There are limits: the import tax suspension applies only to items with no equivalent domestic production, and the IPI suspension does not cover goods made in the Manaus Free Trade Zone.
Companies must give something in return. They have to reserve at least 10% of the processing, storage and data-handling capacity installed under the program for the domestic market. They must also invest at least 2% of the value of the goods they buy in research and innovation projects, according to g1 and InfoMoney. They will also have to publish sustainability reports with the Water Usage Effectiveness (WUE) index and their energy sources; InfoMoney cites a limit of 0.05 liters per kilowatt-hour, checked yearly. Firms based in the North, Northeast and Center-West regions get a 20% cut in both obligations. Companies that fail the requirements can be forced to repay the suspended taxes, with interest and fines.
The natural gas maneuver
The original bill required data centers to meet their entire electricity demand with "clean or renewable" sources, such as wind and solar. The Senate replaced that rule with "low emission" sources, defined as those "with reduced environmental impact and low emissions of greenhouse gases". What qualifies will be set by regulation. For Folha, the change opens the door to natural gas.
InfoMoney reports that congressional caucuses and industry groups had asked for gas to be named expressly as a complementary source. An explicit mention, however, could have sent the bill back to the Chamber of Deputies and delayed the vote. The rapporteur, Senator Cid Gomes, defended seizing the "window of opportunity" to bring investment to Brazil. Lula can now sign the bill into law, veto it entirely or strike parts of it.