Senate approves Green Hydrogen Legal Framework

O Senate approved on the night of Wednesday (19), with changes, the PL 2.308 / 2023 that creates the regulation mark for the production of green hydrogen in Brazil and which determines tax breaks e financial for the sector. 

The Senate still will need to analyze the suggestions change to the project. The vote is expected to take place in the next session.

Before it became law, the matter will have to return to new analysis by the Chamber of Deputies, since the senators proposed changes to the project. 

O PL 2.308 / 2023 sets rules and benefits to stimulate the industry fuel hydrogen in Brazil. The objective is to contribute to decarbonizing the Brazilian energy matrix.

The text creates the National Low Carbon Emission Hydrogen Policy, which comprises the National Hydrogen Program; the Low Carbon Hydrogen Development Program; the Brazilian Hydrogen Certification System; and Rehidro (Special Incentive Regime for the Production of Low-Carbon Emission Hydrogen). 

O reporter of the text was the senator Otto Alencar (PSD-BA), which promoted changes to the original text and accepted amendments to the project. 

According to the document approved, it will be encouraged the production of low-carbon hydrogen, obtained from renewable sources, such as solar, wind, hydraulic, biomass, ethanol “and others to be defined by the public authorities”.

According to the approved text, the Rehidro credit and tax incentives will be valid for five years, on goals and objectives and monitoring of public authorities. Rehidro will suspend the incidence of PIS/Pasep and Cofins, including imports, on the purchase of raw materials, intermediate products, packaging, stocks and construction materials made by qualified green hydrogen producers. 

In addition to the production companies, will be able to participate in the Rehydro those involved in the transportation, distribution, packaging, storage or marketing of the product. 

O Regulation of the Executive will have to establish requirements for entry into the Rehydroas the minimum investment in research, development and innovation and a minimum percentage of goods and services of national origin in the production process, except in cases where there is no national equivalent or the quantity produced is insufficient to meet domestic demand.

Check out more details about the project below.

debentures

As beneficiary companies by the Rehydro may also issue debentures subject to lower taxation, the so-called incentive debentures, which makes them more attractive to investors.

debentures are credit securities issued by companies and traded on the capital market as a way of raising funds for their projects. The earnings of individuals with incentivized debentures are exempt from Income Tax while the earnings of legal entities pay 15%.

Certification

O approved text creates also a Brazilian certification system for the sector, which will be carried out by a competent authority that certifies the characteristics of the production process, the inputs used, the location of production, information on the life cycle of hydrogen and the amount of carbon dioxide emitted.

Management

From the text, the guidelines for the execution of incentive policies will be defined by the Comges-PMH2 (Steering Committee of the National Hydrogen Program). 

He will be integrated by up to 15 representatives from bodies of the federal Executive Branch, a representative of the states and the Federal District; a representative of the scientific community; and three representatives from the production sector.

It will be up to ANP (National Petroleum, Natural Gas and Biofuels Agency) authorize the production, import, transport, export and storage of hydrogen. Production, however, can only be permitted to Brazilian companies based in the country. 

Tax credits

It will also be granted Social Contribution tax credit sobre or Incident Net Profit on the purchase and sale operations of low-emission hydrogen and its derivatives produced in the country, as long as the projects stimulate technological development and contribute to regional development and the diversification of the industrial park and the reduction of damage and adaptation to climate change .

O credit will be granted within 60 days of the issuance of the sales invoice and can be used to pay any federal tax. If there is not enough debt to compensate, the credit will be reimbursed in cash.

But the benefit cannot exceed R$1,7 billion in 2028; R$2,9 billion in 2029; R$4,2 billion in 2030; R$4,5 billion in 2031 and R$5 billion in 2032, and will have to be included in the Union Budget. 

Infrastructure

The approved text also amends Law 11.488, of 2007, to include Rehidro companies in Reidi (Special Incentive Regime for Infrastructure Development), which currently benefits companies in the transport, ports, energy, basic sanitation and irrigation sectors. with an approved project for infrastructure implementation.

These companies are exempt from paying PIS/Pasep and Cofins, also on imports, in the sale or import of new machines, devices, instruments and equipment and construction materials.

funding sources

Another important point of the project is that it creates the PHBC (Low Carbon Emission Hydrogen Development Program), with the purpose of constituting a source of resources for the energy transition based on the use of green hydrogen.

Among the program's objectives will be the definition of objective targets for the development of the internal market for low-carbon hydrogen and incentives for the use of low-carbon hydrogen in industrial sectors that are difficult to decarbonize, such as fertilizers, steel, cement, chemicals and petrochemical, in addition to the use of green hydrogen in heavy transport.

With information from the Senate Agency

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