The Egyptian Cabinet has approved a bill of law setting out a package of incentives for projects within the realm of Green Hydrogen production and ancillary industries. In this regard, the bill of law shall apply as follows:
A. Projects Eligible to the Package of Incentives:
According to the bill, the law will apply to Green Hydrogen Projects which will sign the project agreements within a period of five (5) years following the date on which this law will enter into force. This is provided that the maximum duration of the project agreement shall not exceed a period of fifty (50) years. The projects which shall benefit from the incentives under the law will include:
- Projects for the Production of Green Hydrogen and its derivatives.
- Water Desalination Projects which dedicates part of its production to produce Green Hydrogen and its derivatives.
- Renewable Energy Power Plants which dedicate a minimum of 95% of its production to feed Green Hydrogen production projects and water desalination projects.
- Projects for transmission, storage and distribution of Green Hydrogen inside Egypt.
- Projects for manufacturing the inputs and supplies necessary for Green Hydrogen Projects.
The above five types of projects will be defined here in this article as the “Projects.” In order to be eligible for the above incentives, The Project shall satisfy the following conditions:
- The Project shall commence its commercial operations within a period of five (5) years from the date of the conclusion of the respective project agreements.
- A minimum of 70% of the investment cost of the Project shall be financed by foreign currency transferred from outside Egypt.
- The Project shall achieve a minimum of 20% local component, whenever such local component is available.
- The Project shall contribute to the localization and the transfer of new and developed technology to Egypt.
- The Project shall provide a plan for training Egyptian workers.
- The Project shall provide a program for the development of the local community as part of the project’s corporate social responsibility (CSR) plan. This shall be in accordance with article (15) of the Investment Law.
B. Proposed Package of Incentives
The Projects shall enjoy a number of financial and non-financial incentives including the following:
1- Tax Refund in Cash:
A tax refund of not less than 33% and not more than 55% of the paid tax according to the submitted tax returns. This tax refund incentive will not be considered as an income for tax purposes.
The Ministry of Finance shall be committed to pay the tax refund amount within a period of (45) days from the deadline of submitting the tax return. The delay in payment by the Ministry of Finance shall be subject to a delay fee at the discount rate announced by the Central Bank of Egypt.
The Cabinet shall issue the necessary decrees to regulate the categories of the incentive and the requirements for benefiting therefrom.
2- VAT Exemption:
Equipment, machines, raw materials and means of transportation (except for passenger vehicles) necessary for the Projects shall be subject to VAT at zero percent.
3- Customs Exemption:
All imports necessary for the development of the Projects (except for passenger vehicles) shall be exempted from the customs duties which the Ministry of Finance shall bear on behalf of the Project.
4- Exemption from Other Taxes and Duties:
The Projects will be exempted from VAT and the registration fees applicable to its real estate properties. The Projects will also be exempted from stamp duty tax and notarization fees applicable to the registration of the incorporation documents of the Project company as well as its credit facility and pledge agreements.
5- Golden License:
The Projects shall be entitled to obtain one single license (Golden License) for the project under the Investment Law. The Golden License shall cover all stages of the projects from establishing the project, building permits to any licenses pertaining to the operation or the management of the Project.
6- Other Regulatory Incentives
Import Registry Exemption: The Projects shall also be allowed to freely import the equipment, raw materials and spare parts necessary for the project without the need to be registered in the Importer Register.
Export Registry Exemption: The Projects will also be entitled to export its products without being required to register in the Exporter Register.
Shehata & Partners welcomes such a promising decree that shall contribute to the development of Green Hydrogen Projects at a large scale in Egypt and make Egypt a hub for such a type of innovative technology. We hope that the decree is issued as soon as possible to help attract more Green Hydrogen projects to Egypt in the upcoming period.
Shehata & Partners currently represent a South African Green Hydrogen Developer in all legal issues pertaining to its project to Egypt to help it contribute to such an ecosystem as much as possible.