Investment and tax incentives for Green Hydrogen projects in Egypt

Investment and tax incentives for Green Hydrogen projects in Egypt

Green Hydrogen in Egypt

The global transition towards clean energy has created significant opportunities for countries like Egypt to leverage their natural resources and develop innovative renewable energy solutions. One such promising area is the production of green hydrogen – which as per Article 1 of Law No. 2 of Year 2024 is: “Hydrogen produced from the electrolysis of desalinated water based on renewable energy”. In simple terms, it is clean fuel made by using renewable energy to split water into hydrogen and oxygen. Egypt has recently emerged as an attractive destination for investment in green hydrogen projects.

Egypt’s strategic location, abundant renewable energy resources, and supportive government policies have positioned the country as a regional leader in the green hydrogen space. The Egyptian government has made development of a domestic green hydrogen industry a national priority, offering a range of investment and tax incentives to attract both local and international players to participate in this growing market. These incentives, combined with Egypt’s favorable geographic and climatic conditions for renewable energy generation, have sparked a surge of interest from global energy companies, technology providers, and project developers. They see Egypt as an ideal platform to establish large-scale green hydrogen production facilities that can serve both domestic and export markets across the Middle East, North Africa, and Europe.

Conditions for Obtaining Green Hydrogen Incentives

As outlined in Article 6 of the aforementioned law the conditions for obtaining the prescribed incentives are as follows:

  1. The commencement of commercial operation of the project within 5 years from the date of concluding the projects agreements
  2. The project and all future expansions must rely on foreign financing of no less than 70% of the total investment cost.
  3. The project must commit to using a minimum of 20% locally manufactured components of its total project components provide they are available in the domestic market.
  4. The project must contribute to the transfer and localization of advanced technologies and techniques to Egypt and aid in evolving and instigating training modules for Egyptian workers.
  5. There must be a plan to support local communities in which it will be operating in as per Article 15 of Law No.72 of 2017 regarding Investment Law.

Investment and Tax Incentives for Green Hydrogen

The project offers a widespan of tax incentives outlined in Article 4 as a source of encouragement for investors and organizations. These are the following:

  1. The government will provide a cash incentive called “Green Hydrogen Incentive” which amounts to no less than 33% and no more than 55% of the tax paid on the income generated from the hydrogen project and its expansions. The ministry of finance is bound to disperse the incentive within 45 days of the tax return submission, any delay will amount to a late payment fee based on the Central Bank of Egypt.
  2. With the exception for passenger cars all and any equipment tools, machinery, devices, raw materials and supplies which are essential for the project are exempt from VAT.
  3. Any exports of the Green Hydrogen project and its expansions are subject to no VAT.
  4. Tax exemptions for company incorporation contracts, land registration, and real estate actually used in projects.

Non-Tax Incentives Supporting Green Hydrogen Development

In addition to the tax incentives, Article 5 offers a range of non-tax incentives to support the development of green hydrogen projects, these are as follows:

  1. The project company only needs one approval.
  2. The company has the right to import on its own or through others any raw materials, machines, spare parts and any means of transport needed for establishment, expanding and operation of the project without prior needing to be registered as an importer.
  3. The company has the ability to export its products personally or through others without a license and without the need to be previously registered as an exporter.
  4. The company can employ foreign workers with a maximum of 30% of its total number of employees during the first 10 years from the date of signing of the project contract.
  5. The company receives 30% reduction on fees and charges for using seaports and maritime services such as ships and floating equipment.
  6. The company receives a 25% discount on usufruct right of industrial lands used for the Green Hydrogen Plant and another 20% reduction on usufruct rights on storage areas such as warehouses.
  7. Any expansions relative to the project would be allowed a grace period for payment of the usufruct right to all industrial and storage lands, implying that payment starts from the date of commercial operation.

The Future of Green Hydrogen in Egypt

The robust package of investment and tax incentives unveiled by the Egyptian government demonstrates its unwavering commitment to catalyzing growth of the green hydrogen industry. By providing a comprehensive support framework, the government is signaling its strategic intent to position the country as a global leader in the production and export of clean hydrogen and its derivatives. If implemented effectively, they can not only transform Egypt’s energy landscape but also contribute significantly to the country’s broader decarbonization goals and economic diversification agenda.

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