Incentives for Green Hydrogen and Its Derivatives Production Projects

Law No. 2 of 2024, approved a comprehensive package of incentives, exemptions, and guarantees for projects to produce green hydrogen and its derivatives and their expansions. The most important of these incentives is a cash investment incentive called the “Green Hydrogen Incentive.” The enjoyment of these incentives is conditional on the conclusion of project agreements within a specified period.

This law comes within the framework of the state’s orientation towards creating an attractive investment environment and benefiting from the production, use, and export of clean green energy, and establishing projects for the production and trading of green hydrogen and its derivatives, such as green ammonia and green fuel, with the aim of positioning Egypt as an international hub for green hydrogen projects and derivatives.

Green hydrogen is defined as hydrogen produced by the electrolysis of desalinated water using renewable energy. Green hydrogen derivatives are final products that rely on green hydrogen for their production, such as green ammonia and green methanol. Hereafter, we acknowledge the incentives and their conditions for obtaining and benefiting from them.

First: Target Projects

Projects related to the production of  green hydrogen and its derivatives that enter into their project agreements within five years of the date of the effective date of this law are as follows:

1. Green hydrogen production plants and their derivatives.
2. Desalination plants that allocate a percentage of not less than (95%) of their production for use in the production of green hydrogen and its derivatives.
3. Electricity production plants from renewable energy sources, which allocate at least (95%) of their production to green hydrogen, derivatives production plants and desalination plants
4. that Projects that solely transport, store, or distribute green hydrogen and its derivatives produced within the Arab Republic of Egypt.
5. Projects whose activities are limited directly, to manufacturing the supplies or inputs required to produce green hydrogen production plants and their derivatives.
6. Future expansion of green hydrogen production plant projects and its derivatives. without prejudice to article (3), paragraph 4, of this Law.

Second: Incentives and guarantees

Green hydrogen production projects and their expansions shall be granted the following incentives:

1. A cash investment incentive called “Green Hydrogen Incentive” of not less than 33% and not more than 55% of the amount of tax paid with the declaration of tax on the income generated from the direct activity of the project or its expansions. The Ministry of Finance shall be committed to paying this incentive within forty-five days from the end of the period specified for submitting the tax return; otherwise, it shall be entitled to a delay compensation calculated based on the interest rate and discount announced by the Central Bank on January 1st of the year preceding the date of the incentive’s due date. This incentive shall not be considered income subject to tax. A decision of the Council of Ministers shall be issued to determine the categories of the incentive and the controls for granting it, based on a proposal from the competent minister after taking the opinion of the Minister of Finance.
2. Except for passenger cars. Equipment, tools, machines, devices, raw materials, supplies, and means of transport that are necessary and essential for the conduct of the licensed activity for green hydrogen production projects shall be exempted from value-added tax.
3. Exports of green hydrogen production projects Are exempt from value-added tax.
4. It may also be decided by the competent minister, after the approval of the Council of Ministers, to exempt green hydrogen production projects from the due tax on built-up properties, on the properties used in those projects, from stamp duty, documentation fees, and registration fees due on the contracts of establishment of companies and establishments, contracts of credit facilities and mortgages associated with them, and contracts for registering land necessary for the establishment of green hydrogen production projects, and from customs duties due on all imports necessary for the establishment of green hydrogen production projects, except for passenger cars.
5. The project company shall obtain the single approval under the regulation outlined in the Investment Law referred to.
6. Without prejudice to the provisions of laws, regulations, and decisions governing imports, the project company shall have the right to import by itself or through others, what it needs in its establishment, expansion, or operation of raw materials and production inputs, machines, spare parts, and means of transport appropriate to the nature of its activity, without the need to be registered in the import register, and it also has the right to export its products directly or indirectly without a license and without the need to be registered in the export register.
7. The project company has the right to employ foreign workers within the limit of 30% of the total number of its workers, during the first ten years from the date of signing the project agreements.
8. Permission to establish special customs zones for the project’s exports or imports in agreement with the Minister of Finance.
9. The project company shall be granted a discount of 30% of the value of fees for the use of seaports and maritime transport for the services provided to ships in Egyptian seaports, for the use of equipment and fixed and floating installations belonging to the bodies of seaports and the Maritime Safety Authority, and liquid casting activities and ship supply and for electronic services provided by the administrations of Egyptian seaports.
10. The project company shall be granted a discount of 25% of the value of the right of usufruct of industrial lands allocated for the establishment of a green hydrogen production plant, and 20% of the right of usufruct of storage land in ports, without prejudice to the annual increases in the right of usufruct contracts and licenses, with compliance with any other regulatory rules stipulated by the entity with jurisdiction over the lands.
11. Granting a grace period to pay for right of usufruct of industrial and storage lands for the project and its expansions that are allocated by the entities with jurisdiction over the land, for the payment to start from the date of commercial operation of the project, without calculating any interest or penalties.
12. The licenses for the implementation of green hydrogen production projects shall have the same duration as the usufruct periods of the project’s lands.

Third: Conditions for granting the incentives

Prescribed incentives will only be granted to green hydrogen production projects and their derivatives if they meet the following conditions:

1. The project must commence commercial operation within five years of signing the project agreements.
2. The project or its expansions, as the case may be, must be financed by foreign currency funded from abroad by at least 70% of its investment cost.
3. The project must be committed to using locally manufactured components that are necessary for its implementation whenever they are available in the local market, with a minimum of 20% of the project’s components.
4. The project must contribute to the transfer and localization of modern and advanced technologies to Egypt, with the commitment to develop and implement training programs for Egyptian workers.
5. The project company must be committed to developing a plan for the development of the local areas in which it operates through the implementation of corporate social responsibility rules under the provisions of Article 15 of the Investment Law.

The Council of Ministers shall issue a decision that includes the required regulations to ensure that the conditions stipulated in this law are met, based on a proposal from the competent minister, after taking the opinion of the minister concerned with electricity and renewable energy and the minister of finance.

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