By Brazil Stock Guide – Brazil’s lower house approved late Tuesday (24) a bill creating a special tax regime for data center services, preserving a requirement that facilities use only renewable energy and excluding proposals to add natural gas, biomethane or nuclear power.
The measure establishes the Redata program and now moves to the Senate, where it is expected to be considered Wednesday (25). Lawmakers fast-tracked the bill to ensure continuity of a provisional measure set to expire the same day.
The legislation was passed by symbolic vote. It maintains the renewable-only power supply rule, rejecting amendments that sought to broaden the energy mix. Efforts to include natural gas and discussions over data sovereignty are likely to resurface during debate on the Artificial Intelligence bill (PL 2.338/2023). Both proposals are being reported by Deputy Aguinaldo Ribeiro.
The urgency stems from the need to replace Provisional Measure 1.318/2025, which established a similar framework and expires Wednesday (25). The government pushed for approval of a core text to safeguard the legal validity of existing tax incentives for data centers, leaving room for future adjustments through separate legislation.
At least four amendments were withdrawn under an agreement among party leaders. The Speaker’s Board rejected one proposal from the Novo Party on the grounds that it altered the scope of the bill. Another amendment from the Socialism and Liberty Party (Psol), which aimed to tighten environmental requirements, was defeated in plenary by 232 votes to 105. Novo and Psol voted against the bill’s main text, citing concerns over tax waivers, environmental safeguards and digital sovereignty.
During his report, Ribeiro said the Redata regime will last five years, except for exemptions related to PIS, Pasep and IPI, which expire on December 31, 2026. The government estimates tax expenditures of 5.2 billion reais in 2026, 1 billion reais in 2027 and 1.05 billion reais in 2028. He said the declining fiscal impact aligns with the phased implementation of Brazil’s tax reform.
“If we leave it to grant advantages [to data centers] only after the tax reform, which only comes into force in 2027, almost a year from now, we run the risk of losing this enormous opportunity for strategic investments that is presenting itself to the country. One year is an eternity in this sector. The decision window for investments by technology companies and countries interested in hosting this infrastructure is very short,” Ribeiro said.
He added that, according to the federal government, 15 projects are ready to be signed quickly after presidential sanction. “Up to 70% of Brazilian data today is processed abroad. We need to process our data here,” he said, citing the expansion of generative artificial intelligence as a driver of demand.
Ribeiro also argued that once installed, such facilities are costly to relocate, making any missed investment effectively “definitive,” while successful attraction would ensure a “permanent” flow of maintenance, upgrade and expansion spending.
To qualify for the regime, operators must allocate at least 10% of their data center capacity to businesses developed in Brazil, aiming to expand local inputs for new applications, particularly in artificial intelligence. Beneficiaries must also invest 2% of the amount exempted on equipment purchases or imports into research, development and innovation projects in the country.