Egypt Introduces Tax Incentives to Boost Green Hydrogen Production

In a significant move to accelerate the development of green hydrogen, Egypt has unveiled a comprehensive package of tax incentives for projects dedicated to this clean fuel. Under the new legislation, which was signed into law by President Abdel Fattah El-Sisi, green hydrogen developers can receive a tax credit ranging from 33 percent to 55 percent on the taxes paid for these projects.

This legislative change is poised to have a profound impact on the country’s green hydrogen sector. According to media reports, Egypt is currently developing a robust pipeline of 32 green hydrogen projects, representing a total investment of $175 billion. These projects are expected to produce approximately 3.2 million tonnes of green hydrogen annually by 2030, with production projected to increase to about 9.2 million tonnes by 2040. However, many of these projects are still in the planning stages, either awaiting final investment decisions or the commencement of construction.

The newly enacted rules offer several financial benefits to foster the growth of the green hydrogen industry. Companies engaged in green hydrogen projects can now enjoy VAT exemptions on a wide range of project-related expenditures, including equipment, tools, machines, raw materials, and certain transportation costs—excluding passenger vehicles. Furthermore, the legislation permits the tax-free export of renewable hydrogen and its derivatives.

In a bid to streamline operations, green hydrogen producers are now empowered to conduct imports and exports without the need for a license or registration, with the option to operate directly or through intermediaries.

Project developers stand to benefit from additional financial incentives for up to a decade after entering into agreements with the government. These include a 30 percent reduction in fees for services at seaports, including maritime transport and ship servicing; a 25 percent discount on the cost of industrial land rights; and a 20 percent reduction on the value of land rights for storage facilities at ports.

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To qualify for these benefits, developers are required to fulfill specific criteria, including securing at least 70 percent of the project investment cost from international sources and initiating operations within five years of finalizing agreements. They must also commit to sourcing at least 20 percent of project components locally and prioritize the use of Egyptian-made components. Additionally, the employment of foreign workers is restricted to a maximum of 30 percent of the total workforce for the first ten years following project approval.

Egypt’s strategic initiative to incentivize green hydrogen production underscores the nation’s commitment to leading the energy transition in Africa and contributing to global efforts to combat climate change.

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