The government’s proposed law to provide incentives for green hydrogen projects and derivatives was approved by the House of Representatives on Tuesday, under the leadership of Speaker Hanafi Jabali. The approval came after the joint report from the energy and environment committee, headed by Deputy Talaat El-Sweidy, and four other committees was reviewed.
The law aims to offer certain incentives, exemptions, and guarantees to keep the current investors who have signed memoranda of understanding and framework agreements in this field. The goal is to make Egypt an international hub for green hydrogen and derivatives projects, mainly based on renewable energies like solar and wind, by creating an attractive investment environment and speeding up the implementation of their projects.
The law is in line with the Egyptian constitution, especially in terms of economic principles, such as achieving sustainable development, increasing employment opportunities, reducing unemployment rates, supporting competitiveness, encouraging investment, providing an attractive investment climate, increasing production, promoting exports, optimizing the use of renewable energy sources, stimulating investment in them, and urging the private sector to fulfill its social responsibility in serving the national economy and society.
The law consists of seven articles, not counting the publication article. The first article defines the key terms and phrases used in the law, while the second article specifies the law’s scope on green hydrogen projects and derivatives. These include agreements made within five years of the law’s enforcement, covering factories, water desalination stations, power plants, transport, storage, or distribution projects, and projects directly involved in manufacturing components or inputs for green hydrogen and derivatives production.
The third article sets out specific conditions for establishing the project company and governing laws and sets a maximum duration for project agreements. It also requires agreements for project expansions within seven years of the project’s commercial operation start, ensuring that these projects and their future expansions benefit from the incentives in the law.
The fourth article gives various tax incentives to green hydrogen projects and their expansions under this law. These include an investment cash incentive called the “Green Hydrogen Incentive,” ranging from 33% to 55% of the value of the tax paid when declaring income from the project’s direct activities or expansions, depending on the circumstances. Other incentives include exemptions from value-added tax for equipment, tools, machines, devices, raw materials, and supplies, except passenger cars. The value-added tax for exports of green hydrogen and derivatives projects is set at “zero percent.”
The law also allows the relevant minister, with the approval of the Prime Minister, to exempt green hydrogen projects and derivatives from property tax on assets effectively used in these projects, stamp duty, documentation fees, and the monthly fee due on contracts establishing companies, facilities credit facilities, and mortgages related to them, as well as the registration fees for the lands necessary for establishing green hydrogen and derivatives projects. It also exempts customs duties on all imports required for these projects, except passenger cars.
The fifth article outlines the non-tax incentives for green hydrogen projects and their expansions under this law. These include giving the project company a single approval, letting it import what it needs for construction, expansion, or operation from raw materials, production requirements, machinery, spare parts, and suitable transportation means for its activity on its own or through third parties without registering in the importers’ registry. The law also lets the company export its products directly or indirectly without a license and registration in the exporters’ registry.
The non-tax incentives also include allowing the project company to hire foreign workers within the first ten years from signing the project agreements, up to 30% of the total workforce. It allows the creation of special customs areas for the project’s exports or imports with the Minister of Finance’s agreement. It also cuts by 30% the fees for categories related to using maritime ports, maritime transport, and services for ships in Egyptian ports. It also cuts by 25% the fees for the right to use industrial land for setting up green hydrogen and derivatives production factories, and by 20% for the right to use lands for storage facilities at ports. The law states that the licenses for implementing green hydrogen projects and their expansions have the same duration as the right to use project lands.
The sixth article sets the conditions for getting incentives for green hydrogen and derivatives projects and their expansions under this law. Key conditions include starting commercial operation within five years of signing the project agreements and making sure that the project or its expansions are funded by foreign currency from abroad by at least 70% of its investment cost. The law requires using locally made components when available in the local market, making up at least 20% of the project’s components and requires the project’s contribution to transferring and localizing modern and advanced technologies to Egypt, along with the duty to develop and implement training programs for Egyptian workers.
The seventh article states that the competent minister, or a delegate authorized by the Prime Minister, will issue the certificate for enjoying the incentives in this law. This certificate is final and effective on its own, without needing approval from other entities, and all parties must follow its data.
