On Tuesday, September 15, during a ceremony at the Planalto Palace, President Luiz Inácio Lula da Silva (PT) signed Bill 278/2026 into law, establishing the Special Taxation Regime for Data Center Services (aka ReData).

The law creates tax incentives for the establishment of data processing centers in the country, with a focus on facilities dedicated to cloud computing and artificial intelligence.

The bill was approved by the Senate on September 1, without any substantive changes from the version that came from the Chamber of Deputies, where it had been passed in February under urgent procedure, without going through the committees.

The Senate rapporteur, Senator Cid Gomes (PSB), reportedly made only editorial adjustments to prevent the bill from returning to the Chamber of Deputies.

The program provides for the suspension of import duties, the IPI tax, the PIS/Pasep taxes, and the COFINS tax — including those on imports — levied on the purchase, in the domestic or foreign market, of information and communication technology equipment and components intended for data centers.

This benefit may be enjoyed for up to five years and becomes a permanent exemption after obligations are fulfilled.

In the case of the Import Tax, the benefit applies only to products with no equivalent manufactured in Brazil, and the Manaus Free Trade Zone retains specific treatment, with the IPI suspension not applying to certain items produced in the region.

According to government estimates, the tax waiver will total approximately 5.2 billion reais ($1bn) in 2026, with 1 billion reais ($193.7m) projected for each of the following two years. Data from the Ministry of Finance indicate that approximately 60 percent of the data and artificial intelligence resources used in Brazil are processed abroad, a trend attributed, in part, to tax costs.

In contrast, companies registered with ReData will be required to allocate at least 10 percent of their data processing, storage, and handling capacity to the Brazilian market, without the option to export or retain that portion; comply with sustainability criteria, including the use of electricity from renewable or low-emission sources; maintain a Water Efficiency Index of no more than 0.05 liters of water per kilowatt-hour; and invest in the country an amount equivalent to two percent of the value of products purchased using the benefits. Companies located in the North, Northeast, Midwest, or in areas covered by regional development agencies have these requirements reduced to eight percent and 1.6 percent, respectively, and at least 40 percent of investments intended to stimulate the digital economy must be directed to these regions.

Failure to comply with these obligations may result in the collection of suspended taxes, with interest and penalties, and, in the case of the domestic market supply target, the suspension of benefits for new purchases, which will result in the revocation of eligibility if the noncompliance is not corrected within 180 days. Entry into the program will require authorization from the Ministry of Finance, and oversight will be the responsibility of that ministry and the Ministry of Development, Industry, Trade, and Services.

This piece was translated from DCD's Portuguese site and edited by a member of DCD staff.