Legal framework for low-carbon hydrogen signed into law

New statute offers incentives and favorable tax treatment to boost hydrogen production nationwide in Brazil

 

On August 2, the Brazilian Federal Government enacted Law No. 14.948/2024, which establishes the new National Low-Carbon Hydrogen Policy. This effort is part of the broader National Energy Policy, aimed at meeting global climate goals and promoting hydrogen as a clean energy source for high-demand industries.

Aimed at the decarbonization of the energy mix, the law provides tax incentives to encourage the production and sale of industrial hydrogen with low emissions of greenhouse gases. Here are the key takeaways:

 

Tax incentives

A major aspect of the new framework is the creation of the Special Incentive Regime for Low-Carbon Hydrogen Production (REHIDRO). The program is expected to offer tax benefits to legal entities involved not only in the production but also in the storage, transportation, distribution, and trade of low-carbon hydrogen. Additionally, it will support companies engaged in renewable energy generation and biofuel production related to this renewable energy source.

This effort extends the tax benefits outlined in the Special Incentive Regime for Infrastructure Development (REIDI) to these companies, including:

• Suspension of PIS/COFIN taxes on the sale or import of machinery, equipment, and supplies intended for hydrogen projects.
• Suspension of PIS/COFINS-Import taxes when goods or supplies are imported directly.

The benefits also extend to leased assets. Additionally, companies eligible for the program can issue tax-incentivized bonds to raise funds for the implementation or expansion of related projects.

The tax incentives for REHIDRO beneficiaries will be valid for five years, starting on January 1, 2025. Companies already operating in the segment, as well as those that qualify for hydrogen production by January 1, 2030, will be eligible.

It is important to note, however, that beneficiaries are required to invest a minimum percentage in projects related to sustainable development and energy transition.

 

Certification

The regulation establishes guidelines for the creation of the Brazilian Hydrogen Certification System (SBCH2), aimed at ensuring environmental integrity and preventing the double counting of greenhouse gas (GHG) emissions in hydrogen produced in Brazil.

The specific seals and standards for hydrogen certification will be further regulated in the future, and factors such as the adopted chain of custody model and the scope of GHG emissions should be taken into consideration.

Companies will be evaluated based on interoperability and harmonization measures implemented in line with international standards.

 

Industry-oriented tax expertise

Domingues e Pinho Contadores offers advisory support to ensure clients identify and capitalize on tax benefits specific to their industry, maximizing the advantages of sector-specific tax initiatives. Contact us to learn more: dpc@dpc.com.br.