Federal Government creates REDATA with incentives for data centers in Brazil

Provisional Measure 1,318/2025 (“MP 1,318”) established the Special Taxation Regime for Data Center Services (“REDATA”). REDATA is another measure, this time by the Federal Government, to encourage the installation and operation of data centers in Brazil, with the objective of transforming the country into a hub for companies in the segment.

MP 1,318 amended Law 11,196/2005, establishing that legal entities that implement a project to install or expand data center services in Brazil may be eligible for REDATA, in the case of services 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, and established in an act of the Federal Executive Branch.

In addition, the legal entity that has a contractual relationship to supply information and communication technology products industrialized by itself, on its own initiative or by order, for incorporation into the fixed assets of a beneficiary qualified in the Regime, may be eligible for REDATA. For these legal entities, eligibility will cease when the contractual relationship ends.

As a benefit incentive, as of 01/01/2026, the suspension of payment of the following taxes levied on the acquisition in the domestic market and on the import of electronic components and other information and communication technology products is granted, when intended for the fixed assets of a legal entity qualified in REDATA:

I – Contribution to PIS/Pasep and Cofins levied on revenue;

II – Contribution to PIS/Pasep-Import and Cofins-Import;

III – IPI, levied on the importation or remittance of the manufacturing establishment or similar; and

IV – Import Tax (“II”).

It should also be noted that the suspension of IPI and II has limitations for products that are also produced in the Manaus Free Trade Zone (“ZFM”).

The benefited products will be defined by an act of the Federal Executive Branch, which, after its enactment, can only be amended to include new goods.

With the incorporation of the assets into the fixed assets and the fulfillment of the requirements established in REDATA, the suspension of taxes will be converted into a zero rate.

The qualification must be requested by the legal entity, which will cumulatively assume the commitments of:

I – make available, for the domestic market, at least 10% of the capacity for processing, storage and processing of data to be installed with the benefits of the regime, prohibiting its destination for export or own use in the absence of domestic demand;

II – meet the sustainability criteria and indicators defined in the regulation;

III – meet the totality of its electricity demand through supply or self-production agreements from generation from clean or renewable sources, as provided for in regulations;

IV – present a Water Usage Effectiveness (WUE) equal to or less than 0.05 L/kWh (five hundredths of a liter per kilowatt-hour), with annual measurement; and

V – to make investments in the country corresponding to 2% of the value of products acquired in the domestic market or imported with the benefit of REDATA in research, development and innovation projects in priority programs to support the industrial and technological development of the digital economy production chain, as provided for in regulations, in partnership with:

a) Scientific, Technological, and Innovation Institution (“ICT”);

b) Brazilian educational entities, official or acknowledged by the Government;

c) public companies with legal personality under private law that maintain investment funds intended for technology-based companies; or

d) social organizations, qualified according to Law 9,637/1998 or autonomous social services, which maintain a management contract with the Federal Government and which promote and encourage the realization of applied research, development and innovation projects.

Items I and V above are reduced by 20% when the establishment of the qualified legal entity is located in the North, Northeast and Center-West Regions, including the respective areas covered by the regional development agencies.

Adherence to REDATA is subject to the tax compliance of the legal entity in relation to federal taxes and the inexistence of registration in the Informative Register of Unpaid Credits of the Federal Public Sector (“Cadin”). Legal entities opting for Simples Nacional also cannot join REDATA.

MP 1,318 must be converted into law within a maximum period of 120 days (60 initial days and 60 days of extension).