The initiative includes a tax credit of up to US$2.8 billion and a Special Tax Framework for Green Hydrogen Producers in the Magallanes Region and Chilean Antarctica, with the aim of consolidating Chile as a world leader in the production and use of this clean fuel.
The Chilean Ministry of Finance submitted the ‘Green Hydrogen Industry Promotion Bill (H2V)’ to the Chamber of Deputies. This initiative, signed jointly with the Ministries of Energy and Economy, Development and Tourism, seeks to strengthen the National Green Hydrogen Strategy launched by Chile in November 2020, with the aim of making the country a leader in the production and export of this fuel.
Green hydrogen is produced from renewable energies such as solar and wind power and, unlike hydrogen derived from fossil fuels, its use only generates water vapour, making it a key fuel for advancing the country’s decarbonisation. The text contemplates two central axes: a tax benefit (credit for first-category tax) and a special tax framework for H2V producers in the Magallanes Region and Chilean Antarctica.
Green hydrogen and its conversion into fuels is a new industry. It is not like a coal or gas power plant or the manufacture of a standardised product. So, when there is a new industry, in order to materialise investments, a type of financing and security is required, particularly with regard to the sale of these products, which is greater than for a standardised product. We want to consolidate Chile as a world leader in the production and use of this clean fuel,” said Finance Minister Mario Marcel.
In general terms, the project creates a temporary tax benefit consisting of a credit against the First Category Tax (IDPC), which will be available to companies that purchase green hydrogen (H2V) or any of its derivatives, such as ammonia or methanol, from local producers, for a total amount of up to US$2.8 billion.
This benefit will apply exclusively to the first purchase made from an H2V producer and will be available to customers of those producers. Companies that purchase H2V or any of its derivatives will be entitled to a tax credit in the IDPC for each kilogram of H2V purchased, calculated according to the established benefit value (in dollars per kilogram or its equivalent in derivatives).
This incentive will be allocated by an Interministerial Committee made up of the Ministries of Finance (Mario Marcel), Energy (Diego Pardow, who is also honorary president of Hyvolution Chile 2025) and Economy (Nicolás Grau), through annual competitions aimed at new green hydrogen production projects. It is envisaged that between 2025 and 2030, six tenders will be held for the allocation of this tax credit. The design envisages that in the early years a greater volume of credits will be granted and that, progressively, a decreasing ceiling will be established on the amount of the benefit to be requested.
On the other hand, a uniform and special tax framework is created for producers of this clean fuel who set up in the Magallanes Region and Chilean Antarctica. This area offers particularly favourable natural conditions for the production of this fuel, but as there are currently at least three different tax regimes coexisting in the area, it was decided to correct these distinctions.
The initiative proposes that manufacturing companies in this region will be exempt from First Category Tax; access to additional bonuses associated with production or sales will be prohibited; they will be entitled to request VAT exemption on the importation of capital goods; and they will be able to apply for and be awarded the temporary tax benefit established in this bill.
In addition, they will be required to contribute to regional development, in accordance with Article 32 of Law No. 21,210, which modernises tax legislation, establishing that the payment of the contribution must be made in advance, within one month of obtaining the environmental qualification resolution for the project. The bill was sent to the Finance Committee for legislative processing.
Source: CEI Noticias.