EGYPT: Incentives for Green Hydrogen Production Projects

Egypt has promulgated earlier this year its Incentives for Green Hydrogen and its Derivatives Production Projects Law No. 2 of 2024 (the “Green Hydrogen Law”). It was published in the Egyptian Gazette on 27 January 2024 and came into force the following day.

The Green Hydrogen Law aspires to position Egypt as a hub for green hydrogen production, capitalizing on its existing infrastructure, and green hydrogen potential, to satiate clean energy needs of adjacent markets, particularly the EU. The law also aims to advance sustainable social and economic development while limiting carbon emissions, in addition to establishing a favorable investment environment and facilitating procedures that attract foreign investors. 

Criteria and Eligibility Requirements for benefiting from the Green Hydrogen Law are set out below:
I. Companies and Projects eligible to benefit from the Incentives

To benefit from the Green Hydrogen Law, an entity shall be incorporated in the form of a joint stock company for the purpose of carrying out a project to produce green hydrogen or its derivatives (the “Project Company”). This Project Company shall enter into a project contract with the relevant authorities (the “Project Contract”).

The incentives granted under the Green Hydrogen Law are granted to Project Contracts concluded within five years from the date of the Green Hydrogen Law, i.e. no later than 26 January 2029. Green hydrogen projects comprise the following:

• • 1. Green hydrogen and its derivatives production factories;
    2. Desalination factories that allocate a minimum of 95% of their production to be utilized to produce green hydrogen and its derivatives;
    3. Power stations that generate electricity from renewable energy sources, and that allocate a minimum of 95% of their production to feed green hydrogen and its derivatives production factories and desalination factories;
    4. Projects which activities are only limited to transporting, storing, or distributing green hydrogen and its derivatives produced in Egypt; and
    5. Projects which activity are limited to manufacturing the necessary supplies or feedstock for the relevant, approved production factories.

II. The Incentives for Green Hydrogen and its Derivatives Production Projects

• • 1. Cash investment incentive named “green hydrogen incentive”: ranging between 33% and 55% of the paid tax on account of the tax filings made. This operates as a cash back incentive and is not considered as income for tax purposes.
    2. VAT exemption: the tools, equipment, machines, devices, raw materials, supplies, and the necessary vehicles required for operating the project shall be VAT-exempt, with the exception of the passenger vehicles.
    3. VAT rate for exports: all the exports of the projects are subject to zero% VAT.
    4. Golden License: the Project Company may benefit from the golden license (single approval) regime regulated under the Egyptian Investment Law, a comprehensive approval thatcaptures all stages of a project, including set-up, management, operation, and land allocation.
    5. Importers’ and exporters’ register exemption: the Project Company does not need to register itself under the importers and exporters’ register and may immediately, through itself or a third party, import raw materials, machines, spare parts, etc. it needs for the project. Moreover, it may export its products by itself or through an agency without having to obtain a license to this end.
    6. Foreign employees: the Project Company may employ up to 30% foreign employees of its workforce during first ten years following the signing of the Project Contract.
    7. Special customs zones: in coordination with the Minister of Finance, the Project Companymay establish special customs zones for the project’s exports or imports.
    8. Discounted fees: the Project Companies enjoy a (a) 30% discount on the fees applicable on the usage of maritime ports and maritime transport services in Egypt, (b) 25% discount on the consideration of industrial land(s) allocated for the projects and (c) 20% discount on the fees of warehouses at Egyptian ports.

III. Further requirements to benefit from the incentives

To benefit from the incentives, the Project Company must satisfy the following requirements:

• • 1.  The project operation shall commence within five years from the Project Contract date.
    2.  The project shall be financed by foreign currency procured from overseas and which shall represent at least 70% of its investment cost.
    3. The project shall rely on local components so long as they are available in the local market, with a minimum floor of 20% of the project components.
    4. The project shall contribute to introducing modern and advanced technology to Egypt, with a commitment to implement training programs to Egyptian workforce.
    5. The Project Company shall devise a plan for development of the host community as part of corporate social responsibility plan (CSR).

If you would like more information about this topic then please contact us.

• KHALED RAGHEB PARTNER ragheb@amereller.com

• NARIMAN ROUSHDY SENIOR ASSOCIATE roushdy@amereller.com

• KIROLOS MORCOS ASSOCIATE morcos@amereller.com

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Egypt has promulgated earlier this year its Incentives for Green Hydrogen and its Derivatives Production Projects Law No. 2 of 2024 (the “Green Hydrogen Law”). It was published in the Egyptian Gazette on 27 January 2024 and came into force on the following day.