BDO Indirect Tax News

A Brazilian Provisional Measure (PM) enacted on 17 September 2025 introduces tax incentives for datacentre services in the form of a Special Tax Regime for Datacentre Services (REDATA) and a Special Tax Regime for the Export Platform of Information Technology Services (REPES). Qualifying projects are eligible for the suspension of certain federal taxes, particularly on imported equipment. The measures aim to attract investment, expand the number of datacentres and transform Brazil into a digital infrastructure hub to address the global pressure for technological infrastructure driven by advances in AI, cloud computing and the Internet of Things. Although the PM is effective immediately, it must be approved by the National Congress within 120 days to be converted into law.

Specific qualifications must be met for an entity to be eligible for REPES and REDATA. To benefit from REPES, the legal entity must primarily engage in software development or the provision of information technology services, excluding datacentre services, and must commit, upon opting into the regime, to export at least 50% of its annual gross revenue derived from the sale of goods and services. To qualify for REDATA, the legal entity must implement a project for the installation or expansion of datacentre services within the Brazilian territory.

Tax Incentives

The PM provides for the suspension of the following federal taxes and contributions:

• PIS/Cofins
• IPI (Excise Tax), except for products manufactured in the Manaus Free Trade Zone (ZFM)
• Import duty applicable to goods without domestic equivalents or industrialised in the ZFM, as listed by the Federal Executive Branch.

These suspensions apply to the domestic sale and importation of electronic components and information and communication technology products, provided they are incorporated into the fixed assets of a qualified legal entity and other requirements are met. It is important to note that, under the tax reform that will apply as from 2027, PIS/Cofins will be replaced by the Contribution on Goods and Services (CBS) so monitoring the conversion of the PM into law will be essential to determine whether CBS will be included in future benefits (for prior coverage, see the article in the July 2024 issue of Indirect Tax News).

Due to the impending tax reform, the PIS/Cofins and IPI rates on products to be listed in an act issued by the Federal Executive Branch will be as follows for calendar year 2026:

• PIS/Cofins: 1.65% and 7.6%, respectively
• PIS/Cofins-Importation: 2.10% and 9.65%, respectively
• IPI: rate depends on essential nature of the product

The import duty suspension will apply for five years.

Taxpayer Commitments under REDATA

In conjunction with the tax incentives available to qualified entities, REDATA imposes obligations on the beneficiary of the incentives. Such legal entities must:

• Invest 2% of the value of products acquired on the domestic market or imported in research, development and innovation;
• Allocate at least 10% of processing capacity to the domestic market; and
• Adopt sustainability criteria, including the use of clean energy and technologies to reduce water consumption.

Legal Considerations and Obligations

The PM introduces a conditional tax benefit model under which the datacentre sector will be subject to commitments relating to innovation, sustainability and domestic market supply. The benefit focuses on the acquisition of equipment and inputs or on the effective export of more than 50% of services. However, goods manufactured in the Manaus Free Trade Zone or those with domestic equivalents are excluded, which gives rise to questions about the definition of “non-equivalence,” a concept that has previously sparked controversy in other Brazilian regimes.

Although REDATA reduces federal taxes, the highest costs for datacentre projects stem from state-level ICMS (i.e., VAT on sales and services). Some states are considering their own regimes for the sector, highlighting the need for coordination among federal, state and municipal governments, especially in light of the tax reform, expected to be fully phased in by 2033.

Another key aspect is sustainability. The requirement to contract energy from renewable or clean sources still awaits regulation. The lack of objective criteria may create legal uncertainty, given the high energy demands of datacentres and the need for clarity regarding supply or self-generation contracts. Brazil’s Free Energy Market, set to open in 2026, will allow all consumers to choose their electricity provider, intensifying competition for lower tariffs.

Expected Impacts

The PM signals a paradigm shift in federal government policy: granting tax incentives while stipulating measurable obligations by counterparties.

The program is expected to:

• Stimulate technological innovation through partnerships with universities and research centres or through internal R&D;
• Improve investment profiles in underserved regions by offering incremental benefits to the North, Northeast and Centre-West regions of Brazil;
• Reduce external dependence on data processing;
• Strengthen the General Data Protection Law by keeping data under national jurisdiction; and
• Promote sustainable energy consumption among datacentre operators.

By linking tax incentives to commitments in innovation, R&D, sustainability, domestic supply and the future export of services, the program reflects a new balance between incentives and accountability. It aims to reduce external dependence on data processing and reinforce Brazil’s digital sovereignty. The success of the regime ultimately will depend less on its design and more on its implementation, particularly whether the monitoring of corporate obligations will yield the investments needed for Brazil’s digital transformation.

Edilson Muniz
Queli Morais
BDO in Brazil