Supreme Court says underground power-line cost sharing is not subject to VAT
The Supreme Court has ruled on whether value-added tax can be added to the cost-sharing payment a local government makes when overhead power lines are moved underground. Yonhap News and the Seoul Shinmun reported that, in a construction-payment lawsuit filed by Korea Electric Power Corporation against Pyeongtaek City, the Supreme Court upheld a lower-court ruling that the cost-sharing payment itself was not subject to VAT. Undergrounding power lines is often presented as a public project for streetscape and safety, but who pays which cost becomes a budget and tax issue.
Key summary
- The Supreme Court found it hard to treat the payment for city-requested underground power-line work as consideration for a service.
- The VAT amount KEPCO sought from Pyeongtaek was not accepted, while a limited portion of actual expenses remained payable.
- The ruling signals that local governments and public corporations should state cost items more clearly when signing infrastructure contracts.
Confirmed facts
- Yonhap News reported that the Supreme Court’s Second Division finalized the lower-court decision in KEPCO’s payment lawsuit against Pyeongtaek City.
- The case arose from a 2017 project to move overhead distribution lines underground at Pyeongtaek City’s request.
- Pyeongtaek agreed to bear part of the undergrounding cost and all road-restoration costs, while KEPCO later billed VAT on the payment.
- The court said the project is fundamentally carried out under the authority and responsibility of the electric utility, so the payment itself was not a service fee.
Why this is a daily-life issue
Underground power-line work is often discussed as a way to improve street environments and pedestrian safety. But as project costs grow, local budgets, public-company accounting and possible resident burdens follow. This ruling shows that even when a project is desirable, tax items cannot simply be added without checking the legal nature of the payment. Other local governments planning similar work may need to review their agreements and settlement standards.
| Issue | Direction of the ruling | What to check |
|---|---|---|
| Nature of payment | Not easily treated as a service fee | Whether the contract clearly states cost items and tax responsibility |
| Value-added tax | The payment itself was not treated as taxable | How actual subcontracted tax costs are separately settled |
| Public-project impact | May guide undergrounding and road-restoration cost calculations | Whether similar structures apply to other local projects |
What to watch next
- Watch whether KEPCO and local governments revise tax and settlement clauses in future undergrounding agreements.
- It is also important to see whether similar projects now face additional cost-sharing disputes.
- Residents should look not only at project necessity but also budget burden, construction period and road-restoration scope.
Search keywords
- underground power-line cost sharing VAT
- Supreme Court KEPCO Pyeongtaek lawsuit
- power-line undergrounding value-added tax
- local government infrastructure cost sharing