Haarlem District Court: iPad is a computer

Publication date 10 December 2012

The tax treatment of iPads made available to employees (the ownership remains with the employer) or provided to employees (the ownership is transferred to the employee) or for which they receive a reimbursement was unclear. The question that arose was whether an iPad should be regarded as a communication tool or a computer. On November 30, 2012, the Haarlem District Court ruled that an iPad must be regarded as a computer.

The general rule for employers who currently do not apply the work-related costs rules (werkkostenregeling; “WKR”) and therefore fall under the transitional rules for reimbursements and provisions, is that the business use component of the communication tool must be more than 10%, while for computers this must be at least 90%. This also applies if iPads are made available to employees. If these conditions are met, then this will not be regarded as taxable salary.

On November 30, 2012, the Haarlem District Court ruled that an iPad must be regarded as a computer. In the case at hand, provided iPads to its employees. In dispute was whether the purchase price of the iPads should be regarded as salary.

The District Court concluded that an iPad is suitable for communication, as it provides telephone, internet and email access. Unlike the smartphone, which is regarded as a communication tool, the iPad cannot however be regarded as a device that has the appearance of a mobile phone and is also suitable for functions other than oral communication.

Taking into account the dimensions of the iPad and its many other applications, the District Court concluded that oral communication should not be considered the main function of the iPad. According to the District Court, the iPad must therefore be regarded as a small computer that is also suitable for various forms of communication.

Practical consequences
At the time the dispute was pending before the District Court, the Decree of the Deputy Minister of Finance of July 5, 2011, which states that a communication tool is regarded as such if it has a diagonal screen size of no more than 7 inches (17.78 cm), had not yet taken effect. In the case at hand, the screen size was larger. However, in ruling on whether this involved a communication tool or a computer, the District Court also attached importance to the appearance of the apparatus.

In the case before the Haarlem District Court, the employees had received iPads in December 2010, without any conditions concerning the use thereof. If employers provide devices to their employees for the performance of their employment activities, it is important that agreements are made regarding business use, the use of apps and the possibility to operate the iPad at a distance. Our position is that ‘communication’ has a broader definition than just oral communication. Therefore, at issue is whether the iPad’s main function is communication in the broadest sense of the word and not just oral communication.

Work-related costs rules
For the application of the work-related costs rules, business standards will only apply to devices that have been made available to employees and are fully or partially used at the work place. If:
·        the devices are not fully or partially used at the workplace and are not sufficiently used for business purposes, or
·        this concerns a reimbursement or provision,
then the value of the devices must be deducted from the fixed allowance of 1.4% (1.5% in 2013).

At the moment, this is only a District Court judgment. It seems likely that the taxpayer will appeal this judgment, in which case the qualification of the iPad as a computer is not yet the last word on the matter.