• Brazil has enacted Redata, giving qualifying data-centre equipment relief from specified federal taxes and import duties
  • Participating projects face requirements covering domestic capacity, research spending, energy sources and water efficiency

The fact

Brazilian President Luiz Inácio Lula da Silva signed the Redata data-centre incentive programme into law on 15 September. The scheme gives qualifying projects tax relief on equipment used to build, expand or modernise data centres in Brazil.

The relief covers specified federal taxes on eligible ICT equipment, including PIS/Pasep, Cofins and IPI. Some imported equipment without a Brazilian equivalent can also qualify for import-duty relief. The government estimates Redata will reduce federal tax revenue by about R$5.2 billion in 2026.

Companies joining the programme must meet several conditions. At least 10% of benefiting computing, storage or data-processing capacity must normally serve the Brazilian market, while 2% of eligible equipment spending must go towards research, development and innovation in Brazil. Lower thresholds apply in the North, Northeast and Centre-West. Redata also includes requirements on electricity sources and water efficiency. The law replaces an earlier temporary measure that expired in February after the Senate approved the new legislation on 1 September.

The assessment

Redata lowers the cost of some of the equipment that goes into a data centre, but it does not make the whole project cheaper. Developers still have to pay for the site, construction, power connections and the rest of the infrastructure around the servers. The benefit will therefore vary depending on how much of a project's spending is actually covered by the scheme.

The conditions attached to that relief also affect the calculation. Companies must commit part of the benefiting capacity to the Brazilian market, spend on local research and meet the programme's energy and water requirements. Those obligations may fit comfortably into some projects and require more changes in others.

For BTW readers, the incentive is useful only when the tax saving is large enough to justify those commitments. Developers will need to work that out project by project rather than treating Redata as a blanket improvement in data-centre returns.

What to watch

Watch the implementing rules, the equipment that qualifies for relief and the first companies approved under Redata. Project disclosures showing the value of eligible purchases, domestic capacity commitments and research spending will make it easier to see how much the programme changes actual development costs.