Brazil's ReData regime makes clean power the price of a tax holiday

Brazil's Senate has approved a tax regime designed to pull data center construction into the country, sending Bill No. 278/2026 to President Luiz Inácio Lula da Silva for signature after a Tuesday vote that was symbolic and without objections, as Data Center Dynamics first reported. The measure now moves to the president with a notification to the Chamber of Deputies, and because the Senate limited itself to drafting changes, the bill will not need a new vote in the lower house.

The regime, called ReData, suspends five federal taxes — Import Tax, IPI, PIS/Cofins, and PIS/Cofins-Import — on information and communication technology components and equipment bought for authorized data centers, a suspension that lasts five years and converts into exemptions once an operator meets the program's conditions. The bill also rewrites the import-review test, replacing “no domestic equivalent” with “no equivalent domestic production” as the standard for reviewing imports — a change that can determine whether a project can bring equipment in at all.

Getting here took most of a year: the earlier vehicle, Provisional Measure No. 1,318/2025, lapsed in February, and although the Chamber of Deputies approved ReData on February 25, the Senate pulled it from the agenda that same day, leaving the bill to sit for months while companies, industry associations, and parliamentary caucuses pressed their cases. The logjam broke only after a coordinated push by President Lula, Senate President Davi Alcolumbre, and Chamber Speaker Hugo Motta.

The version that passed keeps the environmental, regional, and research and development provisions that the Chamber had written in; rapporteur Senator Cid Gomes retained them in his report and added floor adjustments. The final dispute was over energy. Senator Laercio Oliveira wanted natural gas listed among the renewable sources allowed to power the facilities, but rather than settle the question by enumerating fuels, the Senate rewrote the requirement to say only that energy must come from “low-emission” sources — a formulation that cleared the way for unanimous approval while leaving the natural-gas question unresolved until the rules are implemented.

The conditions attached to ReData matter more than the headline tax relief: beneficiaries must cover all of their contractual electricity demand with renewable or low-emission sources, hold water use in cooling systems at or below 0.05 liters per kilowatt-hour, and publish sustainability reports — operating requirements written directly into the fiscal benefit, not advisory targets.

The clean-power condition is the sharpest one because a project's entire contracted electricity load must qualify, not just the portion it wants to shield from taxes. That makes the power purchase agreement a structural piece of the project financing, and it gives the phrase “low-emission” real leverage: if future rules treat natural gas as low-emission, a wider set of projects can claim the exemption; if they do not, developers will need to secure renewable supply that matches the round-the-clock load of a data center.

The fiscal numbers attached to the bill are not where the action is: the projected decline in federal revenue reaches R$1 billion (about US$200 million) in 2027 and R$1.05 billion (US$210 million) in 2028, and the broader consumption tax reform is expected to eliminate PIS and Cofins and cut IPI to zero outside the Manaus Free Trade Zone anyway. In effect, ReData is a bridge into a tax system where several of these levies are already scheduled to disappear, and for data center developers, the value of the regime depends on the next five years of import decisions — which is exactly why the implementation rules for “low-emission” will be the real deliverable.

The structure implicitly admits something about how data center projects actually get built: tax policy can make a project cheaper, but it cannot make a grid connection faster or make water appear. ReData's clean-power requirement, if enforced credibly, ties the tax break to the two operational inputs most likely to slow a project down.

That the regime was brought back through a joint effort by President Lula, Senate President Davi Alcolumbre, and Chamber Speaker Hugo Motta, all pulling in the same direction, suggests data centers have become a policy priority in Brasília, not a niche tax matter.

If President Lula signs the bill, Brazil will have built the tax chassis for a data center push, but the hard part, as with every data center market right now, is power and water. Consent, grid access, and cooling water are the constraints that actually decide what gets built; ReData has the rare virtue of putting those constraints inside the tax law. A developer that can show a signed clean-energy contract and a water-efficient design has a clear path to the exemption, while a developer that treats the tax holiday as an offset for unresolved energy issues has a financial structure, not a project.

Brazil's regulators will now define “low-emission” in the implementation rules, and whether the country's generators and grid operators can support the firm, round-the-clock supply a data center needs depends on that definition. The natural-gas argument Senator Oliveira raised has moved to a venue with less visibility and more at stake.