February 4, 2024

Egypt Releases New Law for Green Hydrogen Incentives

A new law is issued in Egypt under number 2 for 2024 regulating the Incentives for Green Hydrogen Projects and Its Derivatives (the “Law”). The law comes into force as of 28 January 2024.

The Law defined the green hydrogen projects to include:

  1. Production plants of green hydrogen and its derivatives.
  2. Water desalination projects dedicating 95% of its production to produce green hydrogen and its derivatives.
  3. Solar power plants which dedicate 95% of its production to supply energy to green hydrogen production projects and water desalination projects referred to in 1 and 2 above.
  4. Projects for transmission, storage and distribution of green hydrogen produced in Egypt.
  5. Projects for manufacturing the inputs and supplies necessary for the production plants referred to in 1 above.

The Law will apply to the projects which will sign the project agreements within 5 years following the date in which the law will enter into force or within 7 years for project expansions. The incentives will apply for the whole duration of the project agreements.

The qualified projects will enjoy several monetary and non-monetary incentives as following:

Monetary Incentives

1.    Tax Cashback

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

The Ministry of Finance is committed to paying the cash back within 45 days from the deadline for 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.    VAT Exemption on Imports

All imports necessary for the development of the green hydrogen project, except passenger cars, will be exempted from VAT.

3.    0% Rate VAT on Exports

Exports of green hydrogen projects will be subject to VAT at zero rate.

4.    Exemption from other Taxes and Fees

Upon the approval of the Cabinet, a green hydrogen project will be exempted from the real estate tax applicable on the real properties used for the project. It will also be exempted from stamp duty tax and notarization fees applicable on the registration of the incorporation contract of the project company as well as on facility and pledge agreements.

Regulatory Incentives

In addition to the above monetary incentives, a qualified green hydrogen project is entitled to the following regulatory privileges:

  1. Obtain the 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.
  2. Freely import the equipment, raw materials and spare parts necessary for the project without the need to be registered at the Importer Register. The project will also be entitled to export its products without being required to register at the Exporter Register.
  3. Hire foreign workers/employees up to 30% of the workforce of the project during the first ten years of the lifetime of the project.
  4. Establish its own customs gate for imports and exports after agreement with the Ministry of Finance.
  5. A reduction of 30% of the fees applicable for using the services of the Egyptian ports.
  6. A reduction of 25% of the usufruct fees for land allocated for the establishment of the green hydrogen plant, and 20% reduction on the usufruct fees for land used as warehouses at Egyptian ports.
  7. A grace period for payment of the land usufruct fees until the commercial operation date of the project.
  8. The project license will be granted for the same duration of the project agreements.

Eligibility

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

  1. The project to reach commercial operation date within 5 years from signing the project agreements.
  2. A minimum of 70% of the investment cost of the project be financed by foreign currency from outside Egypt.
  3. The project to achieve a minimum of 20% local component.
  4. The project contributes in the localization and transfer of the technology to Egypt.
  5. Provide a program for the local community development as part of the project’s corporate social responsibility (CSR) plan.
Authors

Get in Touch

Related posts

Subscribe to our Newsletter

Subscribe to Receive Legal Updates