May 17, 2023

Egypt Announces Green Hydrogen Incentive Package

The Egyptian Cabinet of Ministers approved bill on incentives of projects of green hydrogen and its derivatives.

Scope of Application

According to the bill, the law will apply on hydrogen projects which will sign the project agreements within five years following the date in which the law will enter into force, provided that the maximum duration of the project agreement will be 50 years. The projects which will benefit from the incentives under the law will include:

  • Projects for production of green hydrogen and its derivatives.
  • Water desalination which dedicates part of its production to produce green hydrogen and its derivatives.
  • Solar power plants which dedicate a minimum of 95% of its production to feed green hydrogen production projects and water desalination projects.
  • Projects for transmission, storage and distribution of green hydrogen inside Egypt.
  • Projects for manufacturing the inputs and supplies necessary for factories.

Proposed Incentives

The qualified projects will enjoy a number of financial and non-financial incentives including the following:

1- Tax Refund

A tax refund of not less than 33% and no more than 55% of the paid tax according to the submitted tax reports. This tax refund incentive will not be considered as an income for tax purposes.

The Ministry of Finance will be committed to pay the tax refund amount within 45 days from the deadline of submitting the tax report. Delay in payment will be subject to a delay fee at the discount rate announced by the Central Bank of Egypt.

The Cabinet of Ministers will issue the necessary decrees to regulate the categories of the incentive and the requirements for benefiting therefrom.

2- 0% Rate VAT

Equipment, machines, raw materials and means of transportation necessary for the projects will be subject to VAT at zero rate.

3- Customs Exemption

All imports necessary for the development of the project will be exempted from the customs duties which the Ministry of Finance will bear on behalf of the project.

4- Exemption from other Taxes and Fees

Green hydrogen projects will be exempted from VAT and the registration fees applicable on its real properties. They will also be exempted from stamp duty tax and notarization fees applicable on the registration of the incorporation documents of the project company as well as its facility and pledge agreements.

5- Single License

A qualified project will be entitled to obtain one single license for the project under the Investment Law. The Single license covers all stages of the projects from establishing the project, building permits trough to the operation and management of the project.

6- Other Regulatory Incentives

A green hydrogen project will also be allowed to freely import the equipment, raw materials and spare parts necessary for the project without the need to be registered in the Importer Register. The project will also be entitled to export its products without being required to register in the Exporter Register.

Eligibility

In order to be eligible for the above incentives, a green hydrogen project will have to satisfy the following conditions:

  1. A minimum of 70% of the investment cost of the project will be financed by foreign currency from outside Egypt.
  2. The project will achieve a minimum of 20% local component.
  3. The project contributes in the localization and transfer of new and developed technology to Egypt.
  4. Provide a plan for training Egyptian workers.
  5. Provide a program for the development of the local community as part of the project’s corporate social responsibility (CSR) plan.

Read also:

Legal Framework of Hydrogen Energy in Egypt – Opportunities and Challenges
Egypt – Cabinet Confirms that Green Hydrogen and Green Ammonia Projects can benefit from Tax Incentives under the Investment Law

For more information, please contact Dr. Fatma Salah at: f.salah@riad-riad.com, and Mohamed Riad at: m.riad@riad-riad.com

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