Mauritania to regulates green hydrogen development with tax incentives

The Green Hydrogen Code, which was passed on 9 September, sets out the legal, tax and customs regime for developing and operating green hydrogen in the country, and defines the rights and obligations of the businesses carrying out these activities. The new law sets also out an institutional framework empowering the Ministry of Energy to implement the governmental policy for developing and operating green hydrogen in Mauritania.

Under the new regime, the Mauritanian Agency for Green Hydrogen (AMHV) is created to regulate the development and exploitation activities of green hydrogen, while developers of green hydrogen projects, and their affiliates and approved subcontractors, will benefit from VAT and various tax exemptions, as well as corporate tax incentives.

Olivier Bustin, an expert in energy projects at Pinsent Masons, said the new law is important for the country’s transition to renewable energy and its plan to become a leading green hydrogen hub in Africa.

Prior to the new law, the country had already signed agreements with international energy groups to develop several major green hydrogen projects, such as the 30GW Aman project by renewable energy developer CWP, a $34 billion green hydrogen facility jointly developed by Germany’s Conjuncta and UAE’s Masdar and Project Nour, to be developed by UK company Chariot.

“Any energy business, whether in the traditional or renewable energy business, that wants to operate a green hydrogen project in Mauritania needs to understand the new law, so do their service providers and subcontractors,” said Bustin.

Under the new law, the operator must first sign a ‘framework agreement’ (‘Accord-cadre’) with the Mauritanian government with a maximum duration of two years, extendable once for a further one year. The framework agreement sets out the terms and conditions for carrying out development activities, specifically pre-feasibility studies and feasibility studies to determine the exploitation of a green hydrogen project.

“Such a framework agreement can be signed further to an unsolicited proposal that has been followed by direct negotiations, if the unsolicited proposal relates to a project that has been considered of strategic interest for the state,” Bustin said.

Once the framework agreement has been signed, and provided that its requirements have been fulfilled, the parties will enter into a ‘global agreement (‘Convention globale’). This global agreement will define the terms and conditions to develop and produce green hydrogen in the country.  It must be approved by the parliament and cannot be executed until the law approving it has been published in Mauritania’s Official Journal. The global agreement provides for as many concomitant or successive phases as necessary, each subdivided into two periods: a first period, including a development phase which shall not exceed five years and, if necessary, a production phase of green hydrogen; and, where necessary, a second period of one or more additional phases to carry out new development activities.

Following the development phase, if the operator confirms its final decision to invest and the availability of the funds required by such an investment, the Minister of Energy may grant a licence to produce green hydrogen. However, a licence can only granted to Mauritanian-incorporated companies with sufficient technical and financial capacities, in accordance with the terms and conditions set out in the global agreement. The licence will initially be issued for a maximum of 35 years and can be renewed twice, for 10 years each time.

Importation of equipment and materials intended to be used by the operator or its subcontractors for the execution of a framework agreement or global agreement will not be subject to VAT. Additionally, a 4% tax is levied on the annual turnover of duly licensed exclusive subcontractors, instead of the corporate income tax.

The holder of a licence to exploit green hydrogen is also entitled to build and operate a desalination plant to use seawater for the project.

The renewable nature of the green hydrogen produced in Mauritania will be attested by the issuance of a traceability guarantee or guarantee of origin as part of the government’s goal to export green hydrogen to Europe.