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Incentives for green hydrogen production projects and derivatives

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In accordance with Law No. 2 of 2024

In exception to the provisions of the Special Economic Zones law promulgated by law No. 83 of 2002 and the Investment law promulgated by law No. 72 of 2017, law No. 2 of 2024 was promulgated on incentives for green hydrogen production projects and derivatives.

The provisions of this law apply to green hydrogen production projects and their derivatives that conclude their project agreements within five years from the date of application.

According to the law, projects to produce green hydrogen and its derivatives are one of the following forms: –

  1. Green hydrogen production plants and derivatives
  2. Desalinated water production plants that allocate at least 95% of their production for use in the production of green hydrogen and its derivatives
  3. Power plants from renewable energies, which allocate at least 95% of their production to feed green hydrogen production plants, derivatives, and desalinated water production plants.
  4. Projects whose activities are limited to the transport, storage, or distribution of green hydrogen and its derivatives produced within the Arab Republic of Egypt.
  5. Projects whose activities are directly limited to the manufacture of supplies or production inputs for green hydrogen production plants and their derivatives.

Note: –

The developer is “the legal person who wishes to implement the green hydrogen project and its derivatives” Establishment of the project company and may establish one or more operating branches of the company in respect of one or more of the company’s activities in accordance with the legislation governing this, and without prejudice to the rules governing each activity, the implementation of the green hydrogen production project and its derivatives under the project agreements shall be in accordance with the legislation governing the implementation of future extensions of this project under an additional agreement to the project agreements after the approval of the Council of Ministers and having taken the opinion of the Minister for Electricity and Renewable Energy.

Project duration of green hydrogen production and derivatives: –

Projects to produce green hydrogen and its derivatives and their future expansion enjoy the incentives prescribed in this Law for the duration of the project agreements, provided that the project agreements for expansion are concluded within seven years from the date of the project’s commencement of commercial operation. The duration of licensing for the implementation of green hydrogen production projects and its derivatives shall be the duration of access to the project’s land.

Incentives for projects to produce green hydrogen and its derivatives: –

The most important incentives for projects to produce green hydrogen and its derivatives are mentioned in the law: –

  • A monetary investment stimulus called “green hydrogen stimulus” is not less than 33% and does not exceed 55% of the value of the tax paid with tax recognition on income realized from the start-up or expansion of the project
  • VAT shall be exempt from equipment, tools, machinery, devices, raw materials, tasks, and means of transport necessary for the conduct of the licensed activity of green hydrogen projects and derivatives.
  • Exports of green hydrogen projects and derivatives are subject to VAT are zero.
  • Also, a decision of the competent minister may, after the approval of the Prime Minister, exempt green hydrogen projects and their derivatives from the tax payable to the real estate used in those projects. and stamp duty, notarization, and monthly fees due from company and enterprise incorporation contracts, credit and mortgage facility contracts, and land registration contracts necessary for the construction of green hydrogen projects and derivatives; The customs tax is payable for all imports necessary for the establishment of green hydrogen projects and derivatives.
  • The project company obtains one approval in accordance with the regulation contained in the investment law referred to.
  • The project company has the right to import, either on its own or through others, the raw materials, production supplies, machinery, spare parts, and transportation appropriate to the nature of its activity, without the need to register them in the importers’ register. It is also entitled to export its products or medium without authorization and without the need to register them in the exporters’ register.
  • The project company has the right to employ foreign workers within 30% of its total number of employees, within the first 10 years of signing the project agreements.
  • Allow the establishment of special customs services for the project’s exports or imports in agreement with the Minister of Finance.
  • The Project Company grants a 30% reduction in the value of fees and categories for the utilization of seaports, shipping and services performed to vessels in Egyptian seaports, for the utilization of missions and fixed and floating installations of the seaport authorities and the Maritime Safety Authority, for liquid casting and ship catering activities and electronic services provided by Egyptian seaport departments.
  • Project Company grants a 25% reduction in value for utilization of industrial land allocated for the construction of the green hydrogen production plant and its derivatives, and a 20% reduction in utilization of port storage warehouse land, without prejudice to annual increases for utilization of utilization contracts and licenses.
  • Grant a grace period to pay for the utilization of the project’s industrial and storage land and its expenditures allocated by the mandate holders, to be the commencement of payment from the date of commercial operation of the project, without calculating any interest or fines.

Conditions for granting incentives to green hydrogen production projects and derivatives: –

The following conditions are provided for the granting of incentives to green hydrogen production projects and their derivatives and their expansions:

  1. The business operation of the project shall commence within five years from the date of the conclusion of the project agreements.
  2. The project or its expansion according to the circumstances shall depend on foreign exchange financed from abroad at least 70% of its investment cost.
  3. The project is committed to using the locally manufactured components necessary for its implementation whenever available in the local market and with a minimum of 20% of the project’s components.
  4. The project should contribute to the transfer and localization of modern and sophisticated technology and technologies to Egypt while committing to the development and implementation of training programs for Egyptian employment.
  5. The project company is committed to developing a plan for the development of the local areas in which it operates through the implementation of community liability rules.

The Council of Ministers shall, upon the presentation of the competent Minister and after taking the opinion of the Minister for Electricity and Renewable Energy and the Minister of Finance, issue a decision on the necessary controls to verify the availability of the conditions provided for in this law.

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