Open Decision Ledger · Tax & international taxation
Undergrounding cost contributions as not consideration for services
Supreme Court, June 5, 2026, 2026Da201517 (judgment)
Case name: 공사대금
Official text on the National Law Information Center
Question
Where an electric business operator accepts a request under Article 72-2(1) of the Electric Business Act, carries out an undergrounding project at its own authority and responsibility, and concludes an agreement with a local government on bearing the necessary costs, are the sums the operator receives from that local government consideration for a supply of services included in the VAT tax base?
Holding
In principle, no. The scheme the Court read, which came in with the amendment of 30 March 2011 (Act No. 10500) through the new Article 72-2 of the Electric Business Act and the Operating Guidelines for Undergrounding of Overhead Distribution Lines, takes it as the basic premise that the operator performs the project at its own authority and responsibility, while the local government bears the necessary costs under the polluter-pays principle and the operator may, at its discretion, share part of those costs by an individual agreement. Money the operator receives from the local government on such an agreement is therefore not consideration for a supply of services to it, unless there are special circumstances, and cannot be seen as included in the VAT tax base. The Court dismissed the appeal and put the appeal costs on the plaintiff.
Summary of the holding, verbatim
전기사업자가 지방자치단체장 등의 전기사업법 제72조의2 제1항에 따른 요청을 받아들여 지중이설사업을 스스로의 권한과 책임하에 이행하면서 같은 조 제2항 및 ‘가공배전선로의 지중이설사업 운영기준’에 근거하여 지방자치단체와 필요한 비용의 부담에 관한 약정을 체결하였을 뿐이라면, 전기사업자가 지방자치단체로부터 지급받는 금원은 특별한 사정이 없는 한 지방자치단체에 제공하는 용역의 공급에 대한 대가라고 볼 수 없어, 부가가치세 과세표준에 포함된다고 볼 수 없다.
Unofficial English translation
Where a power business operator accepted a request by the head of a local government, etc. under Article 72-2 (1) of the Electric Utility Act and carried out the underground relocation project under its own authority and responsibility, and merely entered into an agreement with the local government concerning the bearing of the necessary expenses on the basis of paragraph (2) of the same Article and the ‘Operational Standards for the Underground Relocation of Overhead Distribution Lines,’ then unless there are special circumstances, the monetary amount paid to the power business operator by the local government cannot be regarded as consideration for the supply of services provided to the local government, and therefore cannot be regarded as being included in the taxable base for value-added tax.
Disposition
Dismissed Stated in the decision
상고를 기각한다. 상고비용은 원고가 부담한다.
Unofficial English translation
The appeal is dismissed. The costs of the final appeal shall be borne by the plaintiff.
Form of the test
Elements stated Stated in the decision
비용에 관하여는 원인자부담의 원칙에 따라 지방자치단체가 필요한 비용을 부담하되, 전기사업자도 재량에 따라 지방자치단체와의 개별적인 협약으로 그 비용 중의 일부를 분담할 수 있도록 한 것이다.
Unofficial English translation
With regard to expenses, the local government bears the necessary expenses in accordance with the principle that the party responsible for the cause bears the expense, but the power business operator is also permitted, at its discretion, to share a portion of those expenses through an individual agreement with the local government.
Factors
- 전기사업자가 스스로의 권한과 책임하에 지중이설사업을 이행한다는 것을 기본 전제로 하면서도
- 비용에 관하여는 원인자부담의 원칙에 따라 지방자치단체가 필요한 비용을 부담하되
- 전기사업자도 재량에 따라 지방자치단체와의 개별적인 협약으로 그 비용 중의 일부를 분담할 수 있도록 한 것이다
- 특별한 사정이 없는 한
Unofficial English translation
• While taking as its basic premise that the power business operator carries out the underground relocation project under its own authority and responsibility,
• with regard to expenses, the local government bears the necessary expenses in accordance with the principle that the party responsible for the cause bears the expense, but
• the power business operator is also permitted, at its discretion, to share a portion of those expenses through an individual agreement with the local government;
• unless there are special circumstances
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2020. 9. 3. 선고 2020다227837 판결(공2020하, 1947)
Unofficial English translation
Supreme Court Decision 2020Da227837 decided September 3, 2020 (Gong 2020 Ha, 1947)
Decisions referred to
대법원 2020. 9. 3. 선고 2020다227837 판결(공2020하, 1947)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
What special circumstances would make the sums an electric business operator receives from a local government on a cost-sharing agreement consideration for a supply of services included in the VAT tax base?
A later Supreme Court decision finding such special circumstances on a comparable agreement would require this entry to be read again. An amendment to Article 72-2 of the Electric Business Act, to the Operating Guidelines for Undergrounding of Overhead Distribution Lines, or to the taxed supply provisions of the Value-Added Tax Act would also call for a fresh reading.
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Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The reasons of the judgment below, as the Supreme Court set them out, held that the plaintiff, as an electric business operator, was the project operator of this undergrounding project, and that the defendant, the local government which provided the cause of the project, bore part of the costs needed for it under Article 72-2(2) of the Electric Business Act. On that basis the court below held that the amounts the defendant bore in its relationship with the plaintiff could not be regarded as consideration for a supply of services taxable under the Value-Added Tax Act. The court, date and case number of that judgment, the Suwon District Court, 16 January 2026, 2024Na78887, are taken from the official case header, not from the reasons quoted by the Supreme Court.
Supreme Court standard: The Supreme Court found no error. Reading the reasons of the judgment below against the relevant law and the record, it held that the court below had not misapprehended the law on identifying the project operator, on polluter-pays charges, or on what counts as a taxable supply under the Value-Added Tax Act. The Justices unanimously dismissed the appeal and put the appeal costs on the losing party.
Distinguishing conditions
- A payment accompanied by special circumstances that make it consideration for a supply of services, since the rule applies only unless such circumstances exist.
- An electric business operator that does not accept a request under Article 72-2(1) of the Electric Business Act or does not carry out the project at its own authority and responsibility, since the statutory scheme presupposes that it does.
- A project whose costs are not shared under an agreement based on Article 72-2(2) of the Act and the Operating Guidelines, since the Court addressed money received on such an agreement.
Record verification notes
Establish first who the project operator is and whether the operator accepted a request under Article 72-2(1) and performed the project at its own authority and responsibility. Then read the cost agreement against Article 72-2(2) and Articles 11, 12, 13 and 15(1) of the Operating Guidelines for Undergrounding of Overhead Distribution Lines (17 November 2015, Ministry of Trade, Industry and Energy Notice No. 2015-240), and check whether the payment is a cost contribution rather than a price. Finally look for special circumstances and check which version of Article 4(i), Article 11(1)(i), Article 29(1) and Article 29(3) of the Value-Added Tax Act applies.
From the official text
Points at issue
전기사업자가 지방자치단체장 등의 전기사업법 제72조의2 제1항에 따른 요청을 받아들여 전선로의 지중이설사업을 스스로의 권한과 책임하에 이행하면서 지방자치단체와 필요한 비용의 부담에 관한 약정을 체결한 경우, 전기사업자가 지방자치단체로부터 지급받는 금원이 용역의 공급에 대한 대가로서 부가가치세 과세표준에 포함되는지 여부(원칙적 소극)
Unofficial English translation
Whether a monetary amount paid to a power business operator by a local government, where the power business operator accepted a request by the head of a local government, etc. under Article 72-2 (1) of the Electric Utility Act and carried out the underground relocation project of power lines under its own authority and responsibility while entering into an agreement with the local government concerning the bearing of the necessary expenses, is included in the taxable base for value-added tax as consideration for the supply of services (in principle, negative)
Summary of the holding
전기사업법이 2011. 3. 30. 법률 제10500호로 개정됨에 따라 신설된 같은 법 제72조의2 및 이에 따라 마련된 ‘가공배전선로의 지중이설사업 운영기준’(2015. 11. 17. 산업통상자원부 고시 제2015-240호) 제11조, 제12조, 제13조, 제15조 제1항의 규정들은 전기사업자가 시장·군수·구청장 또는 토지소유자(이하 ‘지방자치단체장 등’이라 한다)의 요청에 따라 전선로의 지중이설사업(이하 ‘지중이설사업’이라 한다)을 시행하더라도 전기사업자가 스스로의 권한과 책임하에 지중이설사업을 이행한다는 것을 기본 전제로 하면서도, 비용에 관하여는 원인자부담의 원칙에 따라 지방자치단체가 필요한 비용을 부담하되, 전기사업자도 재량에 따라 지방자치단체와의 개별적인 협약으로 그 비용 중의 일부를 분담할 수 있도록 한 것이다. 전기사업자가 지방자치단체장 등의 전기사업법 제72조의2 제1항에 따른 요청을 받아들여 지중이설사업을 스스로의 권한과 책임하에 이행하면서 같은 조 제2항 및 ‘가공배전선로의 지중이설사업 운영기준’에 근거하여 지방자치단체와 필요한 비용의 부담에 관한 약정을 체결하였을 뿐이라면, 전기사업자가 지방자치단체로부터 지급받는 금원은 특별한 사정이 없는 한 지방자치단체에 제공하는 용역의 공급에 대한 대가라고 볼 수 없어, 부가가치세 과세표준에 포함된다고 볼 수 없다.
Order
상고를 기각한다. 상고비용은 원고가 부담한다.
Unofficial English translation
The appeal is dismissed. The costs of the final appeal shall be borne by the plaintiff.
Provisions referred to
전기사업법 제72조의2 제1항, 제2항, 부가가치세법 제4조 제1호, 제11조 제1항 제1호, 제29조 제1항, 제3항
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