On January 28^th, 2024, Law No. 2 of 2024 concerning Incentives of the Green Hydrogen and its Derivatives Production Projects (the “Green Hydrogen Incentives Law”) has been entered into force, as an exception of the Economic Zones with Special Nature Law No. 83 of 2002 and the Investment Law No. 72 2017 (the “Investment Law”).

Scope of Applicability:

The Green Hydrogen Incentives Law provisions’ scope of applicability shall be on all green hydrogen production agreements concluded within five (5) years from the date of entry into force of the Green Hydrogen Incentives Law. Green hydrogen production agreements shall include the following exhaustive list of projects on the production of green hydrogen and its derivatives (the “Green Hydrogen Projects”):

1. Factories for the production of green hydrogen and its 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. Plants producing electrical energy from renewable energy sources, which shall allocate no less than 95% of their production to fuel the factories producing green hydrogen and its derivatives and desalinated water production plants;
4. Projects whose activity is limited to the transport, storage or distribution of green hydrogen and its derivatives produced within the Arab Republic of Egypt;
5. Projects whose activity is directly limited to the manufacture of production requirements or inputs necessary for the factories producing green hydrogen and its derivatives.

Incentives:

In accordance with the Green Hydrogen Incentives Law, the Green Hydrogen Projects and/or their expansions shall be granted the following incentives:

1. A monetary investment incentive of not less than 33% and not exceeding 55% of the value of the tax paid with the tax declaration on the income achieved from the commencement of the activity in the project or its expansions, to be disbursed within forty-five (45) days from the end of the deadline specified for submitting the tax return (the “Green Hydrogen Incentive”);
2. Equipment, tools, machinery, devices, raw materials, and means of transport necessary for the exercise of the licensed activity for Green Hydrogen Projects shall be exempt from VAT, with the exception of passenger cars;
3. Exports of Green Hydrogen Projects are subject to VAT at a zero rate.
4. Green Hydrogen Projects may also be exempted from real estate tax due on real estate used in the said projects, from the stamp tax, documentation and registration fees due on contracts of incorporation of companies and establishments, credit facilities and mortgage contracts associated with them, land registration contracts necessary for the establishment of projects, and from customs tax due on all imports necessary for the establishment of Green Hydrogen Projects with exception to passenger cars;
5. The Green Hydrogen Projects’ company shall obtain one approval in accordance with the Investment Law provisions, whereas the single approval is for the establishment, operation and management of the Green Hydrogen Projects, including building permits, and the allocation of the necessary real estate for it, and this approval shall be automatically entered into force without the need to take any further action;
6. The Green Hydrogen Projects’ companies shall have the right to import or export, by themselves or through third parties, its establishment, expansion or operation requirements of raw materials, production requirements, machinery, spare parts and means of transport appropriate to the nature of its activity, without the need to register them in the importers register or the exporters register;
7. The Green Hydrogen Projects’ companies shall have the right to hire foreign employees within the limits of 30% of the total number of its employees, during the first ten (10) years from the date of signing the Green Hydrogen Projects’ agreements;
8. Allowing the establishment of special customs departments for the Green Hydrogen Projects’ exports or imports in agreement with the Minister of Finance;
9. The Green Hydrogen Projects’ companies shall be granted a reduction of 30% of the value of fees and categories for the use of seaports and maritime transport, for the services performed for ships in the Egyptian seaports;
10. The Green Hydrogen Projects’ companies shall be granted a reduction of 25% of the value of the usufruct of industrial lands allocated for the establishment of a plant for the production of green hydrogen and its derivatives, and 20% of the usufruct of the lands of storage warehouses in ports;
11. Granting a grace period to pay for the usufruct of the industrial and storage lands of the project and its expansions allocated by the authorities with jurisdiction over the land, so that the payment begins from the date of commercial operation of the project, without calculating any interest or fines;
12. The periods of licenses required for the implementation of the Green Hydrogen Projects for the shall be the same as the terms of the usufruct of the project lands.

Conditions:

In order to grant Green Hydrogen Projects the aforementioned incentives as per the Green Hydrogen Incentives Law, the following conditions shall be cumulatively satisfied:

1. The commercial operation of the Green Hydrogen Projects shall commence within five (5) years from the date of concluding the Green Hydrogen Projects’ agreements.
2. The Green Hydrogen Projects or their expansions shall rely in their funding on foreign exchange financed from abroad at a rate of not less than 70% of its investment cost.
3. The Green Hydrogen Projects shall commit to using the locally made components necessary for its implementation whenever they are available in the local market and with a minimum of 20% of the components of the Green Hydrogen Projects.
4. The Green Hydrogen Projects should contribute to the transfer and localization of modern and advanced technology and techniques to Egypt, with a commitment to develop and implement training programs for Egyptian employees.
5. The Green Hydrogen Projects’ companies shall be committed to developing a plan for the development of the local areas in which it operates through the implementation of the rules of social responsibility in accordance with the provisions of the aforementioned Investment Law.