In a bid to solidify its position as a leading global hub for green hydrogen manufacturing, the Egyptian government has introduced a draft bill that would provide substantial tax incentives to green hydrogen projects.
The proposed legislation grants a tax credit of 33-55% on earnings from the production of green hydrogen and its derivatives, aimed at attracting foreign investments and encouraging domestic production.
The tax credit scheme includes provisions for desalination plants that supply water to green hydrogen projects, as well as renewable energy facilities that contribute at least 95% of the power required for the projects. These facilities would also be eligible for the tax credit, enhancing the overall sustainability and self-sufficiency of the initiatives.
To qualify for the financial incentives, projects must meet stringent requirements set by the Egyptian Cabinet. These include securing a minimum of 70% of the project’s funding from foreign investors and ensuring that at least 20% of the project’s components are domestically sourced. These conditions emphasize the government’s commitment to international collaboration and the development of a local green hydrogen ecosystem.
The draft bill is now awaiting approval from both chambers of Egypt’s bicameral legislature before it can become law. The legislative process might take some time, considering the complexity and the need for projects to be operational within five years.
The proposed tax credit is just one of the various financial incentives outlined in the bill to support Egypt’s growing green hydrogen industry. Additional benefits include exemption from value-added tax (VAT) on materials and equipment purchased for the projects, as well as waivers on taxes and fees related to company and land registration, credit facilities setup, and mortgages. Moreover, projects involved in the production of green hydrogen derivatives like green ammonia or methanol would enjoy a customs duty exemption on imported items.
Egypt’s move to introduce these favorable financial measures aligns with the global trend of countries announcing subsidies and incentives for green hydrogen projects. By offering a competitive tax credit, Egypt aims to attract international investors and foster the development of a thriving green hydrogen sector. The country is positioning itself as a major player in the green hydrogen market and seeks to establish itself as an exporter of ammonia.
In comparison to other countries, Egypt’s proposed tax credit surpasses that of the United States, which offers a maximum tax credit of $3/kg, and Canada, which provides a 40% tax credit. The European Union is also set to join the race, with plans to initiate an auction for price premiums in December.
Egypt’s ambitious efforts to create a favorable investment environment for green hydrogen projects and position itself as a prominent global player in the green energy transition are indicative of the country’s commitment to sustainable development and reducing carbon emissions. The proposed tax credit, if implemented, has the potential to attract significant investments, stimulate economic growth, and pave the way for a greener and more sustainable future.
