Egypt's draft hydrogen law proposes a 55 percent tax credit for green hydrogen projects

Green hydrogen projects in Egypt could receive tax credits of up to 55 per cent, according to a new draft bill approved by the government, as part of the country's attempt to strengthen its position as the world's leading producer of the gas. It is unclear how the level of tax incentives for individual projects will be set.

The tax credit is also available for desalination plants that provide an undisclosed percentage of water to the green hydrogen project, and for renewable energy installations that provide at least 95 percent of the green Hydrogen project's electricity.

The bill, passed at a meeting chaired by Egyptian Prime Minister Mustafa Madbouli, sets strict criteria for financial incentives, requiring projects to identify at least 70 percent of project financing from foreign investors and to use at least 20 percent of components produced in Egypt. Projects must be operational within five years of the bill becoming law.

Along with the tax breaks, the bill provides a number of financial incentives for Egypt's nascent green hydrogen industry, including VAT exemptions for project equipment purchases and materials, exemptions from taxes related to company and land registration, and taxes on the establishment of credit facilities and mortgages.

Green hydrogen and derivatives such as green ammonia or methanol projects will also benefit from tariff exemptions for imported goods under the Act, except for passenger vehicles.

Egypt has also deliberately created the Suez Canal Economic Zone (SCZONE), a free trade zone in the busy Suez Canal region, to attract foreign investors.

Outside the free trade zone, Egypt's state-owned Alexandria National Refining and Petrochemicals Company recently reached a joint development agreement with Norwegian renewable energy producer Scatec, A US $450 million green methanol plant will be built at Damietta Port, which is expected to produce about 40,000 tonnes of hydrogen derivatives per year.