AI Data Residency Requirements by Region: The Complete Enterprise Compliance Guide

In the evolving landscape of artificial intelligence, data residency and compliance have become critical concerns for enterprises, particularly as regulatory pressures intensify worldwide. High-profile fines, such as Meta's €1.2 billion penalty for transferring EU user data to the United States, underscore the financial risks of non-compliance. Deloitte's 2025 report highlights that 73% of enterprises prioritize data privacy and security as their top AI risk concern, while 77% consider a vendor's country of origin in AI purchasing decisions. The concepts of data residency, sovereignty, and localization are crucial but distinct; they pertain to where data is stored, the jurisdiction governing it, and legal mandates for data to remain within borders. The US CLOUD Act complicates this by allowing US law enforcement access to data stored abroad by US companies. Common AI operations, including API inference and fine-tuning, create multiple data residency touchpoints, necessitating careful compliance strategies. Regional regulations vary, with the EU AI Act, China's strict localization rules, and India's sector-specific mandates leading the way. Enterprises are increasingly adopting technical solutions such as self-hosted LLMs, sovereign clouds, and confidential computing to ensure compliance while maintaining operational efficiency. The emphasis is on architecting systems that align with legal requirements, ensuring data remains within appropriate jurisdictions to avoid significant penalties and safeguard business operations.