TopTier – March 2026

We are delighted to share the March edition of TopTier. The newsletter will focus on hot topics and legal development impacting on various aspects of the data centre industry.

This issue has been edited by Antonella Ceschi with contributions from the Data Centre's team.

Please get in touch if you would like to discuss any of the issues raised in these articles, or visit our webpage for more information about Bird & Bird’s International Data Centre Group.

Click on the links below to jump to the respective article:

Contents

1. New FIDIC Carbon Management Guide: How this could become a game-changer for data centre developments
   
2. HRB or not HRB, or Life on the Edge – Edge data centres and higher risk buildings
   
3. Faster approval procedures for data centres? A new proposal from the European Commission
   
4. Italy’s emerging regulatory framework for data centres
   
5. Italy’s data centre market: Growth outlook and strategic drivers
   
6. Australia data centres
   
7. REDATA: Brazil’s new tax framework for data centres – Scope, Incentives and strategic trade-offs
   
8. Tech & Comms Trends and Predictions 2026
   

SIGN UP FOR OUR QUATERLY DATA CENTRES UPDATE

READ THE FULL NEWSLETTER HERE

---

New FIDIC Carbon Management Guide: How this could become a game-changer for data centre developments

Global demand for digital infrastructure is ever increasing. This also applies to the scrutiny for the data centre sector, considering energy & water consumption as well as carbon emissions. On 2 December 2025, FIDIC launched its Carbon Management (CM) Guide as well as its accompanying Carbon Emissions Management (CEM) Guidance. This set of documents provides for new tools to help improve & monitor the sustainability of the development & usage of new data centres.

READ THE FULL STORY

For more information, please contact Andrea Chao.

---

HRB or not HRB, or Life on the Edge – Edge data centres and higher risk buildings

Data centres form the backbone of the EU's digital infrastructure – they drive digitalisation, enable cloud services, streaming, e-commerce and artificial intelligence, and contribute significantly to digital sovereignty. With over 2,000 locations and an installed IT capacity of more than 2,700 MW, Germany is the European leader. At the same time, data centres in Germany are under increasing regulatory pressure: energy efficiency, the use of waste heat and the expansion of renewable energies are key issues that are enshrined in national and EU directives.

READ THE FULL STORY

For more information, please contact Sophie Phillips and Jane Hughes.

---

Faster approval procedures for data centres? A new proposal from the European Commission

As demand for data processing and storage continues to surge, driven by advancements in AI and other technologies, the construction, secure operation and sustainability of data centres have become focal points for industry stakeholders and the wider global community. There are a number of challenges that arise in the context of data centres, such as increasing pressure to reduce carbon footprint, reducing energy and water usage, and recycling waste heat. Further challenges include new regulatory regimes in the EU and the UK, cyber security and data protection risks, and practical issues around constructing data centres.

Italy’s emerging regulatory framework for data centres

In late 2025, the Italian government enacted a comprehensive Energy Decree (Decree-Law No. 175 of 21 November 2025) which was supposed to introduce a range of urgent measures on energy policy — including, for the first time, specific regulatory provisions governing data centres. These norms were unexpectedly removed the day before publication, with the announcement that they will soon be included in a specific decree for data centres which is expected soon.

READ THE FULL STORY 

For more information, please contact Antonella Ceschi.

---

Italy’s data centre market: Growth outlook and strategic drivers

Italy is stepping into the spotlight as one of Europe’s fastest-growing data centre markets. Traditionally overshadowed by the FLAP-D cluster (Frankfurt, London, Amsterdam, Paris, Dublin), Italy is now attracting significant attention from global investors, hyperscalers, and AI innovators. This transformation is driven by a combination of strategic geography, accelerating cloud adoption, and the explosive demand for AI infrastructure.

Australia data centres 

In late November, a new industry body launched in Australia representing the interests of data centre developers and operators, reflecting Australia’s continued effort to address the growing role of AI and other rapidly advancing technologies in Australia. Data Centres Australia’s (DCA) formation comes at a critical time as data centres provide an economic and technological opportunity for Australia.

REDATA: Brazil’s new tax framework for data centres – Scope, incentives and strategic trade-offs

Data centres as strategic infrastructure: why Brazil matters

The rapid expansion of data centres has become a defining feature of the global digital economy. Driven by exponential growth in data processing and storage requirements — particularly in connection with artificial intelligence, cloud computing, streaming services and high-performance computing — data centres are no longer ancillary real estate assets, but mission-critical infrastructure.

In this context, Brazil has emerged as one of the most promising jurisdictions for large-scale data centre investments. The country combines a predominantly renewable energy matrix, a large and increasingly digitalised consumer market, expanding international connectivity and a relatively stable power transmission system. More than 84% of Brazil’s installed electricity generation capacity derives from renewable sources, a decisive advantage for global operators subject to stringent ESG and decarbonisation targets.

Brazil’s geographic position also strengthens its role as a digital gateway between South America, North America, Europe and Africa. This combination of energy availability, scale and connectivity has already attracted significant commitments from hyperscalers and cloud service providers, with substantial investments announced to expand cloud and AI infrastructure. At the same time, data centres are technically complex, capital-intensive and operationally unforgiving. Their success is not measured by physical completion alone, but by the ability to operate continuously, reliably and efficiently from day one.

These characteristics place data centres at the intersection of energy policy, digital sovereignty, telecommunications regulation and environmental compliance, prompting jurisdictions worldwide to adopt targeted fiscal and regulatory frameworks. It is against this backdrop that REDATA must be understood.

Objective and scope of REDATA

REDATA is a targeted fiscal policy instrument aimed at reducing the tax burden associated with investments in digital infrastructure in Brazil. Its objectives are explicitly linked to broader public policy goals: stimulating the internalisation of data processing activities, fostering technological innovation across the digital economy value chain, and promoting environmental sustainability in energy- and resource-intensive operations.

The regime is designed to address the structural characteristics of data centre projects, which are marked by high upfront capital expenditure, long investment cycles and significant exposure to regulatory and operational risks. In this sense, REDATA departs from generic or sector-neutral tax incentives by focusing on a specific category of digital infrastructure that is increasingly recognised as critical to economic development and digital sovereignty.

From a material perspective, REDATA applies to activities associated with data centre infrastructure, understood as services involving the storage, processing, management and administration of data and digital applications. Its scope expressly encompasses cloud computing services, high-performance computing environments and artificial intelligence workloads. By doing so, the regime seeks to ensure technological neutrality and long-term relevance, avoiding obsolescence as computing models evolve.

By linking fiscal incentives not merely to the acquisition of physical assets, but to the performance of data processing activities within Brazilian territory, REDATA aims to anchor digital value creation locally and align private investment decisions with national development objectives.

What qualifies as “data centre services”? Conceptual boundaries and regulatory relevance

REDATA adopts a functional and technology-neutral definition of “data centre services”, encompassing the provision of computational infrastructure and resources dedicated to the storage, processing and management of data and digital applications. This includes, expressly, cloud computing, high-performance computing and artificial intelligence workloads.

At the same time, the regulatory framework recognises that the concept of a data centre is not uniform in either legal doctrine or market practice. Different operational models coexist, including hyperscale facilities operated by single users, colocation environments hosting multiple clients, cloud platforms delivering virtualised services, and edge data centres designed to reduce latency through geographic proximity.

This lack of conceptual uniformity has direct regulatory implications. Under REDATA, eligibility and compliance will ultimately depend on how services are classified by the Executive Branch based on the Brazilian Nomenclature of Services (NBS). As a result, the precise delineation of what constitutes a qualifying data centre service becomes central to legal certainty for investors and operators.

The recognition of this complexity underscores the importance of clear and coherent secondary regulation. Without adequate conceptual precision, there is a risk that materially similar operations could be treated differently for tax purposes, undermining predictability and increasing regulatory risk in a sector characterised by long-term, capital-intensive investments.

Tax incentives: scope, mechanics and legal effects

REDATA allows for the suspension of federal taxes levied on domestic acquisitions and imports of electronic components and other information and communication technology (ICT) goods destined for incorporation into the fixed assets of a qualified data centre. The taxes covered include PIS and COFINS on revenues and on imports, IPI (Federal Excise Tax) and Import Tax.

The suspension is converted into a zero-tax rate once the goods are effectively incorporated into the data centre’s fixed assets and the statutory counterbalancing obligations are fulfilled. This structure is particularly relevant for data centre projects, which are characterised by front-loaded investment profiles and significant capital expenditure during construction and commissioning phases.

The application of the regime is subject to positive lists of eligible goods defined by the Executive Branch. In addition, specific limitations apply: the suspension of IPI does not apply to goods manufactured in the Manaus Free Trade Zone when a domestic equivalent exists, while the Import Tax benefit is limited to goods without a domestic equivalent.

Eligible taxpayers and the co-eligibility regime

REDATA is available to legal entities implementing projects for the installation or expansion of data centres in Brazil, provided that such projects involve the provision of data storage, processing and digital application management services. Eligibility is conditioned upon full tax compliance, including the absence of registration in the federal default registry (CADIN), and companies under the simplified tax regime (Simples Nacional) are expressly excluded.

Access to the regime is subject to a formal qualification (habilitation) process, which functions as a gatekeeping mechanism. This reinforces the policy-driven nature of REDATA and ensures that only projects aligned with its objectives may benefit from the incentives.

A distinctive feature of the regime is the introduction of a co-eligibility (co-habilitation) mechanism, applicable to manufacturers of ICT goods integrated into the fixed assets of a qualified data centre. In such cases, the conversion of the tax suspension into a zero rate occurs upon delivery or sale of the goods to the qualified operator, provided that the contractual relationship remains in force.

This structure reflects a deliberate policy choice to extend the economic effects of REDATA beyond data centre operators themselves, integrating suppliers into the incentive framework and strengthening domestic production chains. From a transactional perspective, it also introduces additional contractual and compliance considerations, as the continuity of tax benefits becomes linked to the persistence and structure of supply arrangements.

Mandatory counterbalancing obligations: market access, sustainability and innovation

REDATA conditions the enjoyment of tax benefits on the cumulative fulfilment of counterbalancing obligations.

A minimum of 10% of the actual data storage and processing supply must be allocated to the domestic market. Compliance is measured economically, based on the ratio between domestic and total revenue from incentivised services, and is subject to annual verification and independent audit. Alternatively, taxpayers may opt to replace this requirement with an additional investment in research, development and innovation equivalent to 10% of the value of incentivised goods.

From an environmental standpoint, operators must meet their entire energy demand through clean and renewable sources, comply with a maximum water usage effectiveness (WUE) index of 0.05 L/kWh, and observe sustainability criteria to be defined in secondary regulation.

In addition, beneficiaries must invest at least 2% of the value of incentivised goods in research, development and innovation activities within the digital economy value chain, reinforcing REDATA’s innovation-driven character.

Regional differentiation and development policy

REDATA introduces differentiated rules for projects located in Brazil’s North, Northeast and Central-West regions. In these cases, the minimum domestic capacity allocation and R&D investment thresholds are reduced by 20%, provided that at least 40% of R&D resources are applied locally.

This regional modulation reflects the use of digital infrastructure as an instrument of territorial development and economic inclusion, aligning REDATA with broader regional development policies.

Compliance risks and enforcement mechanisms

Failure to comply with REDATA’s obligations triggers the retroactive collection of suspended taxes, plus interest and penalties. Administrative fines may reach 75% or 100% of the unpaid tax, in addition to interest calculated at the SELIC rate.

Non-compliance with the domestic market allocation requirement results in the immediate suspension of benefits for new acquisitions. If the irregularity is not remedied within 180 days, the qualification is cancelled, and the taxpayer and its economic group are barred from reapplying for a period of two years.

Temporal framework and interaction with Brazilian tax reform

REDATA was initially established by Provisional Measure No. 1,318/2025; however, its tax benefits never came into effect due to the absence of the required implementing regulations. The provisional measure ultimately expired on February 25, 2026, but on the same day, the Chamber of Deputies approved Bill No. 278/2026, which substantially reproduces the original provisions. The Bill is currently pending deliberation before the Federal Senate.

Timing is of the essence in the regulation of REDATA, especially when considering that PIS, COFINS and IPI will be phased out starting 2027 as part of Brazil´s tax reform, with PIS and COFINS being replaced by the new Contribution on Goods and Services (CBS - a federal value-added tax operating under a non-cumulative system that allows for broad tax credits), while IPI will have its tax rate reduced to zero for most manufactured goods nationwide. The Import Tax benefit under REDATA applies for a five-year period.

The Brazilian Federal Revenue Service estimates the fiscal waiver associated with REDATA at approximately BRL 5.2 billion for 2026, subject to continuous monitoring and evaluation.

<h4">REDATA and sectoral regulation: convergence with telecom and cybersecurity rules </h4">

In parallel with REDATA, Brazil’s telecom regulator has launched Public Consultation No. 48/2025, aimed at defining technical and operational requirements for data centres integrated into telecommunications networks.

The proposed framework introduces obligations related to operational resilience, physical and cyber security, energy efficiency and environmental sustainability, with compliance demonstrated through certified audits and periodic reassessments. This convergence suggests that access to REDATA benefits will increasingly depend on the integration of tax planning, regulatory compliance and technical governance.

Challenges and opportunities

REDATA presents a combination of significant opportunities and material challenges.

On the opportunity side, the regime substantially reduces the tax burden associated with the acquisition of capital goods required for data centre projects, directly addressing one of the main barriers to entry in a sector characterised by high upfront investment. By conditioning incentives on clean energy use, efficient water consumption and investment in innovation, REDATA aligns fiscal policy with sustainability and technological development objectives, enhancing Brazil’s attractiveness as a destination for digital infrastructure investments.

At the same time, REDATA introduces a complex compliance environment. Eligibility depends on secondary regulation, service classification and positive lists of goods, while the enjoyment of benefits is contingent upon the cumulative fulfilment of multiple obligations. Enforcement mechanisms are robust, with retroactive tax collection, significant penalties and the risk of suspension or cancellation of qualification.

From a strategic perspective, REDATA should therefore be assessed not as a standalone tax incentive, but as part of a broader regulatory ecosystem encompassing energy policy, telecommunications regulation, environmental compliance and digital governance. Investors capable of integrating tax planning, regulatory compliance and operational governance stand to benefit most from the regime.

For more information, please contact Fernando Branco and Livia Germano.

---

Tech & Comms Trends and Predictions 2026

The 2026 edition of our annual Tech Predictions report examines the legal challenges emerging from the rapid pace of technological innovation—set to accelerate even further in 2026. Advancements in AI, cybersecurity, data, and digital infrastructure will profoundly shape businesses, the economy, and society. In addition to AI, the report explores key developments in regulation, cybersecurity, data governance, online safety, and ESG.

ACCESS REPORT