Brazil's Senate Approves ReData Tax Incentive Bill for Data Centers, Sends to President

Brazil's Senate has approved Bill No. 278/2026, establishing the Special Taxation Regime for Data Center Services (ReData), clearing the way for the legislation to be sent to President Luiz Inácio Lula da Silva for final approval. The symbolic vote on Tuesday passed without objections, marking the culmination of a legislative process that had stalled for months after the expiration of Provisional Measure No. 1,318/2025 in February.

The ReData program is designed to suspend federal taxes—including Import Tax, IPI, PIS/Cofins, and PIS/Cofins-Import—for five years on information and communication technology components and equipment intended for authorized data centers. These taxes would be converted into exemptions once beneficiary companies meet specified conditions. The projected fiscal impact is expected to decline starting in 2027, with estimates of R$1 billion (US$200m) in 2027 and R$1.05 billion (US$210m) in 2028, reflecting the broader transition to Brazil's consumption tax reform, which eliminates PIS and Cofins and reduces IPI to zero, with exceptions tied to the Manaus Free Trade Zone.

The bill was approved with drafting amendments Nos. 40 and 41, along with adjustments proposed on the floor by rapporteur Senator Cid Gomes (PSB-CE), whose report retained environmental, regional, and research and development provisions established by the Chamber of Deputies. The main point of contention came from Senator Laercio Oliveira, who advocated for including natural gas among the renewable energy sources eligible for data centers. The plenary resolved the dispute through a drafting change: instead of listing specific sources, the text now requires energy from "low-emission" sources, paving the way for unanimous approval.

The legislative journey had been fraught with delays since the Chamber of Deputies first approved ReData on February 25. The Senate removed the bill from its agenda that same day, postponing the vote for months under pressure from companies, associations, and parliamentary caucuses in the sector. The resumption of proceedings was part of a coordinated effort involving President Lula, Senate President Davi Alcolumbre (União-AP), and House Speaker Hugo Motta (Republicanos-PB).

Under the program's requirements, beneficiary companies must meet their entire contractual electricity demand with renewable or low-emission sources, maintain water efficiency at or below 0.05 liters per kWh in cooling systems, and publish sustainability reports. Companies are also required to invest an amount equivalent to two percent of the value of covered equipment in research and development, with at least 40 percent of those funds allocated to the North, Northeast, and Central-West regions. Additionally, at least ten percent of the installed capacity eligible for incentives must be reserved for the domestic market, a requirement that can be fulfilled by providing capacity to scientific and technological institutions, government agencies, or through additional investments in research and innovation.

Industry leaders welcomed the approval, viewing it as a significant step toward enhancing Brazil's competitiveness in global digital infrastructure investment decisions. Victor Arnaud, president of Equinix in Brazil, said the program reduces the cost of introducing new technologies into the country while imposing conditions that promote renewable energy use, water efficiency, local R&D investment, and domestic capacity reservation. Pedro Moniz, CEO of Quadrante in Brazil and Chile, described the approval as an important step toward creating more favorable conditions for data center expansion in the country.

Leonardo Senra, CRO at Omid, noted that ReData could accelerate data center construction in Brazil but cautioned that more data centers do not necessarily translate into greater technological autonomy or digital sovereignty if the incentive primarily benefits foreign players. Alex Sasaki, Vertiv's VP for Latin America, added that the new policy is drawing attention from leaders in other Latin American countries seeking to accelerate their own AI agendas, positioning Brazil as a model for combining tax policy with a clean energy mix, a skilled workforce, and a mature digital culture to attract AI-focused data center investments.