Green Hydrogen in Egypt

For the past years, Egypt has shown interest in developing the production of energy from environmentally friendly sources. The government aims to use its vast renewable energy resources, particularly solar and wind, to produce green hydrogen. The development of green hydrogen in Egypt could help the country reduce its carbon produced energy and enhance its energy security.

The newly issued law in relation to incentives granted to the green hydrogen projects

On the 27th of January 2024, the Cabinet of Ministers had approved the issuance of a new law in relation to the incentives granted to the green hydrogen and its derivatives production projects No. 2 of 2024 (the New Law).

The New Law includes eight (8) Articles tackling the scope of the granted incentives, kinds of incentives, conditions and requirements, The New Law states its effectiveness the day following its publishment (i.e., 28th of January 2024).

Granted incentives

The New Law grants the green hydrogen projects tax and non-tax related incentives, as follows:

Taxation Incentives:

• A cash investment incentive known as the Green Hydrogen Incentive, equivalent to 33% up to 55% of the tax paid upon declaring the income resulted from initiating activities in the project or its expansions.
• VAT exemption on equipment, tools, machines, devices, raw materials, supplies, and necessary transportation means needed for initiating the project.
• VAT rate for exports of green hydrogen projects and their derivatives is 0%.

Non-taxation Incentives:

1. Obtaining the single approval (i.e., Golden License) for the companies working in green hydrogen production project.
2. Allowing the project company to import any necessities needed to establish the project or expand it or operate it from raw materials, production requirements, machines, spare parts, and the appropriate means of transportation to the activity’s nature, without the need to register the project company in the importer’s register. It is also entitled to export its own products without a license and without the need to register the project company in the exporter’s register.
3. The project company is entitled to use foreign employees within the limits of 30% of the total number of employees in the project during the first ten (10) years commencing from the date of signing the project agreements.
4. Establishment of special customs ports for the project’s exports and imports.
5. A 30% deduction from the value and categories fees, for the use of seaports and sea transport and fee services provided to ships in the Egyptian seaports.
6. A 25% deduction on the value of the usufruct right of industrial lands, which are allocated to establish a hydrogen production plant and its derivatives. In addition to, a 20% deduction on the right to use the storage warehouse lands at the ports.
7. Granting a grace period for the payment of the usufruct right of the project’s industrial and storage lands, where the payment starts from the project’s commercial operational date, without imposing any interest and/or fines.
8. Determining the terms of the licenses granted to green hydrogen production projects as the same term as the right of usufruct of the project’s land.

Conditions to obtain the incentives

The New Law sets conditions for the green hydrogen projects in order to obtain the above-mentioned incentives as follows:

1. The project must begin its commercial operation within five (5) years from the date of concluding the project agreements.
2. The project has to depend on its financing on foreign funds which are financed from abroad for at least 70% of its investment cost.
3. The project must commit to utilizing the domestically made components that are necessary for its implementation, whenever they are available in the local market, with a minimum percentage of 20% of the project components.
4. The project shall contribute to the transfer and localization of modern and advanced technology and technologies to Egypt, with a commitment to develop and implement training programs for Egyptian workers.
5. The project company must commit to develop a plan for the development of the operating local areas by implementing the rules of social corporate responsibility under the Egyptian Investment Law No. 72 of 2017.