Brazilian President Luiz Inácio Lula da Silva signed the Special Taxation Regime for Datacenter Services (Redata) into law this week. The new tax regime aims to encourage the development of data centers in the South American country.
As noted in a press release issued by the Brazilian Ministry of Finance, Redata was approved by the Federal Senate at the beginning of September. The tax regime forms part of a set of actions to encourage participation in the low-carbon economy.
Redata offers developers and operators a five-year suspension of taxes on the purchase of electronic components and other information and communication technology products inside and outside of Brazil. Suppliers of the equipment stand to benefit as well under certain conditions.
In exchange for the tax break, Redata sets out certain commitments data center developers must meet. These include adhering to contractual demand for electricity through supply contracts or self-production from clean or renewable sources. They also set a Water Efficiency Index requirement of 0.05 liters per kWh or less that developers and operators must meet. Other commitments include directing 10 percent of the supply of storage and processing to the domestic market.
Furthermore, organizations granted this exemption must invest 2 percent of the value of products purchased on the domestic market or imported, back into Brazil.
Businesses will need to obtain authorization from the Brazilian Ministry of Finance in order to join Redata and as a condition, all federal taxes must be up to date.
According to Arizton Advisory & Intelligence, as of June 2026, there are 87 data centers in Brazil with 56 in the pipeline expected to add over 4.5 GW of IT capacity, five times the current operational base. As much as 70 percent of the country’s IT capacity is currently located in São Paulo.