BY Habiba Gamal
During its meeting today, chaired by Dr. Mostafa Madbouly, Prime Minister, the Cabinet approved a draft law on incentives for green hydrogen projects and its derivatives.
The draft law stipulates that the provisions of this law apply to green hydrogen production projects and its derivatives for which project agreements are concluded within five years from the date of enforcement of this law, represented by factories producing green hydrogen and its derivatives, and desalinated water production plants that allocate a certain percentage of their production to be used in Production of green hydrogen and its derivatives, and stations producing electric power from renewable energy sources,
which allocate no less than 95% of its production to feed green hydrogen production plants and its derivatives and desalinated water production plants, as well as projects whose activity is limited to transporting, storing or distributing green hydrogen and its derivatives. Within the Arab Republic of Egypt, in addition to the projects whose activity is limited directly to the manufacture of production requirements or inputs necessary for factories, for which a decision is issued by the Council of Ministers based on the proposal of the competent minister, after taking the opinion of the Ministries of Electricity and Renewable Energy and Finance.
The provisions of this law also apply to future expansions of the projects stipulated in the preceding paragraph. Future expansions mean the addition of new assets that lead to an increase in the production capacity of the project. Whether through an increase in capital or through equity.
The draft law also stipulates that the developer undertakes to establish the project company in accordance with the legal system to which it is subject, and it is permissible to establish one or more operational branches of the company that specializes in one or more of the company’s activities, in accordance with the legislation regulating that, and without prejudice to the rules regulating each activity.
The implementation of the green hydrogen production project and its derivatives, according to the project agreements and in accordance with the legislation regulating that, provided that the maximum period for these agreements is fifty years from the date of their conclusion.
The implementation of the future expansions of this project will be according to an additional agreement attached to the project agreements, after the approval of the Council of Ministers, and after taking the opinion of the Ministry of Electricity and Renewable Energy and the jurisdiction on the ground.
Projects for the production of green hydrogen and its derivatives and their future expansions shall enjoy the incentives stipulated in this law throughout the validity of the project agreements, provided that the project agreements for expansion are concluded within seven years from the date of the start of commercial operation of the project.
According to the draft law, green hydrogen production projects and its derivatives and their expansions subject to the provisions of this law are granted several incentives, including a cash investment incentive of not less than 33% and not more than 55% of the value of the tax paid with the tax declaration on the income generated from starting the activity in the project.
Or its expansions, as the case may be, and this incentive is not considered taxable income, and the Ministry of Finance is obligated to spend it within forty-five days from the end of the deadline for submitting the tax return, otherwise it will be charged with a delay fee calculated on the basis of the credit and discount rate announced by the Central Bank on the first of the previous January. On the date of maturity of the incentive, with the exclusion of fractions of the month and the pound, and a decision is issued to determine the categories of the aforementioned incentive and the controls for granting it, based on the presentation of the competent minister after taking the opinion of the Ministry of Finance.
Incentives also include exemption from value-added tax of equipment, tools, machinery, devices, raw materials, materials, and means of transportation necessary for green hydrogen projects and its derivatives, with the exception of passenger cars. Exports of green hydrogen projects and its derivatives are subject to value-added tax at a rate of zero percent.
The Ministry of Finance is obligated to bear the public treasury for both the value of the tax on built real estate that is due on the buildings of green hydrogen projects and its derivatives, as well as the value of the stamp tax, documentation and month fees due on contracts establishing companies and facilities, credit facilities and mortgage contracts related to them, and land registration contracts necessary to establish green hydrogen projects. It also bears the value of the customs tax that is due on all imports necessary for the establishment of green hydrogen projects and its derivatives, with the exception of passenger cars.
Green hydrogen production projects and its derivatives and their expansions subject to the provisions of this law are granted other incentives in addition to the previous incentives, including obtaining a single approval for the project company in accordance with the regulation contained in the Investment Law promulgated by Law No. 72 of 2017 and its implementing regulations.
The project company is also allowed to import by itself or through Through third parties what it needs in the establishment, expansion or operation of the project, including raw materials, production requirements, machinery, spare parts and means of transportation appropriate to the nature of the activity, without the need to register them in the importers register, and it is also entitled to export its products by itself or through an intermediary without a license and without the need to be registered in the Register of exporters, and other incentives.
The draft law included a number of conditions that must be met in order to grant green hydrogen projects and its derivatives and their expansions the incentives established under this law, and among these conditions is that the project begins commercial operation within five years from the date of conclusion of the project agreements, and that the project or its expansions, as the case may be, rely on cash for its financing. The foreigner financed from abroad by at least 70% of its investment cost, and that the project commits to using the locally manufactured components necessary for its implementation whenever they are available in the local market and with a minimum of 20% of the project components, and that the project contributes to the transfer and localization of modern and advanced technology and technologies to Egypt, with Commitment to developing and implementing training programs for Egyptian workers, and for the project company to commit to developing a plan for the development of the local areas in which it operates, by implementing the rules of social responsibility in accordance with the provisions of Article 15 of Investment Law No. 72 of 2017.
The Council of Ministers shall issue, based on the proposal of the competent minister after taking the opinion of the Ministries of Electricity, Renewable Energy and Finance, a decision regarding the necessary controls to verify the availability of the aforementioned conditions.