Case Analysis / Legal Updates

Tax Litigation | High Court Judgment Holding That the Taxation of a Solar Power Plant Was Lawful

2026.02.06정찬우

In this tax litigation, the principal issue was the lawfulness of the taxation imposed on a solar power plant and its solar panels.

This is a case in which the appeal filed by the local government, which contested the tax litigation, was upheld.

1. Tax Litigation, the Case Concerning the Taxation of a Solar Power Plant and Solar Panels

This is a case in which the local government, dissatisfied with the outcome of the tax litigation, filed an appeal.

On appeal, the defendant local government challenged the portion concerning the imposition of resident tax (property component) and local income tax, on which the plaintiff had prevailed at the first instance.

The background of the case is as follows.

The plaintiff is a company that operates a solar power generation business.

The defendant, the head of Jung-gu, Daejeon Metropolitan City, conducted a local tax investigation of the plaintiff's solar power plant and imposed the taxation at issue in this case.

The plaintiff brought tax litigation seeking to revoke the imposition of resident tax (property component and per-capita corporate component), local education tax, and local income tax, totaling approximately 78 million won.

Tax Litigation, the Plaintiff's Arguments

The reasons the plaintiff brought this tax litigation are as follows.

1. The power plant in this case has only fixed-type solar panels consisting solely of supports without any power-driven apparatus, and no separate human facilities exist. The imposition of resident tax (property component), which presupposed the existence of human facilities, is unlawful.

2. The solar panels in this case do not fall under “machinery and equipment” as defined in the former Enforcement Decree of the Local Tax Act. Nevertheless, the defendant regarded the solar panels in this case as machinery and equipment and imposed resident tax (property component) and local income tax, which is therefore unlawful.

The court of first instance in the tax litigation accepted the plaintiff's arguments that the plant did not constitute a place of business equipped with human facilities and that the panels were not machinery and equipment, and held that the taxation was unlawful.

Tax Litigation, the Determination on Whether the Taxation in This Case Was Lawful

The determination of the court that decided the appeal concerning the taxation in this tax litigation is as follows.

1. Determination of whether the plant constitutes a place of business equipped with human facilities

The court found that, under the Electric Utility Act, an electrical safety manager must be appointed to manage the electrical equipment of a solar power plant.

The plaintiff in fact appointed B as the electrical safety manager, and B was stationed at an office within the plant and performed electrical inspection and management duties.

Accordingly, the court held that the plant constituted a “place of business equipped with human facilities” under the Local Tax Act.

2. Determination of whether the solar panels constitute machinery and equipment

Under the Enforcement Decree of the Local Tax Act, “machinery and equipment” means a device that is driven by power to perform certain work.

The court held that fixed-type solar panels also perform the work of converting solar energy into electricity and that, because the principle of power generation is the same as that of tracking-type solar panels, they may be regarded as “machinery and equipment.”

The plaintiff argued that, under the established rules of the Ministry of the Interior and Safety, fixed-type solar panels should be deemed “simple structures without a power-driven apparatus,” but the court did not accept this.

The court emphasized that the established rules are merely administrative guidelines without legal binding force and cannot serve as a standard for interpreting statutes.

2. Tax Litigation, the High Court's Determination on the Appeal

On appeal in this tax litigation, for the reasons set out above, the court applied the standards of legal interpretation and the details of the facts more strictly than the court of first instance, and held that the defendant's taxation was lawful.

Accordingly, the judgment concerning the portion on the imposition of resident tax (property component) and local income tax, on which the plaintiff had prevailed at the first instance, was reversed.

The High Court accepted the defendant's arguments, revoked the portion on which the plaintiff had prevailed at the first instance, and held that the defendant's taxation was lawful.

3. Tax Litigation, Daeryun's Strategy

Tax litigation proceeds on the basis of the distinctive legal framework of tax law.

Because tax law is complex and frequently amended, accurately understanding and applying the latest statutes and precedents generally benefits from the assistance of an attorney experienced in tax litigation.

Tax litigation involves various administrative procedures, such as tax investigations, objections, and filings for administrative adjudication (a request contesting an administrative action before an agency prior to court litigation, comparable to seeking administrative review).

The Tax Group of Daeryun Law Firm LLP provides prompt and convenient legal services for tax litigation and advisory matters through the one-team response of 🔗attorneys handling tax matters, tax accountants, and certified public accountants.