Low-Carbon Hydrogen Legal Framework in Brazil: Law No. 14,948/2024 Sanctioned and Published

On Friday, August 2, 2024, Law No. 14.948/2024 was sanctioned and published, establishing the legal framework for low-carbon hydrogen in Brazil. This legislation, dedicated exclusively to the regulation of one of the main vectors of the energy transition, establishes the National Policy for Low-Carbon Hydrogen. It also establishes a framework of incentives for the industry, including the creation of the Special Incentive Regime for the Production of Low-Carbon Hydrogen (Rehidro). In addition, it grants the National Agency of Petroleum, Natural Gas and Biofuels (ANP) the authority to regulate, authorize, and supervise the hydrogen supply chain and its derivatives and carriers.

See our analysis of the provisions of Law No. 14.948/2024, formerly known as Law Project No. 2.308/2023, in the Brazil Energy Journal.

PHBC Veto

The only modification to the Bill of Law No. 2.308/2023 draft resulted from the presidential veto of Articles 30 through 35, which would establish the Low Carbon Hydrogen Development Program (PHBC).

The veto was motivated by imprecision in the final wording, which did not specify that the "tax credit" was linked to the Social Contribution on Net Profit (CSLL), as discussed throughout the legislative process. This could raise questions about the legality of the tax incentive.

In order to address the illegality pointed out by the Presidency of the Republic, and to establish an explicit link between the PHBC and the CSLL, Bill of Law No. 3.027/2024 was proposed by Deputy José Guimaraes (PT/CE), proposing to recognize the aforementioned tax credits in the operating result and subject them to:

(i) offsetting against own debts, due or overdue, relating to taxes administered by the Special Secretariat of the Federal Revenue of Brazil of the Ministry of Finance; or

(ii) reimbursement in cash within 60 days, in the absence or insufficiency of CSLL debts, or any other federal taxes subject to offsetting.