Way back in 2010, the Dutch branch of RTL wanted to do something nice for its 664 employees and gave each one of them a brand-new iPad as a Christmas present. As the saying goes: “no good deed goes unpunished” and RTL was hit with a tax bill of over Euro 320,000. The reason: the Dutch Tax Authorities decided that the free iPad fitted in the category: “computers and similar devices” which would mean that RTL had to pay income tax on it.
This came as a nasty surprise to RTL that assumed that an iPad should be considered as a ‘telephone, internet and similar communication device’, which is exempted from Dutch income tax.
Needless to say, the iPad story ended up in the Dutch courts. The District Court ruled that the iPad is indeed more a computer than a communication device. The Court of Appeal overruled this decision and ruled that the iPad is in fact a communication device since “inserting the text alone on a touchscreen is already a daunting task, which shows that a tablet is indeed different from a computer. The main purpose of a tablet is to communicate”. Ergo, the Dutch Tax Authorities could kiss their income tax revenues goodbye.
The Dutch Tax Authorities did not take this lightly and turned to the Dutch Supreme Court. This body only rules on principles of law. This means that they are never confused by facts, but need to decide the following: is an iPad under the law a computer or a communication device?
RTL got the short end of the stick: the Dutch Supreme Court ruled that the tablet is (fiscally speaking) not a communication device, but a computer. According to the Dutch Supreme Court, it is not relevant at all what characteristics could apply (a not so supple dig at the ruling of the Dutch Court of Appeal). The Dutch Supreme Court reasoned that according to the law, the first consideration should be if the device could be classified as a ‘computer’. Only if it is clear that this would not be case, should one consider if the iPad might classify as ‘communication device’.
According to the Dutch Supreme Court, jurisprudence indicate that the term ‘computers and similar devices’ entail ‘electronic equipment that entirely or partly are designed for task
s that can also be conducted by a computer’. The legislator quoted examples such as digital calendars, mini notebooks and GPS tracking devices. The Dutch Supreme Court ruled that an iPad fits this description perfectly, and the tablet therefore does not qualify as being a communication device.
This landmark ruling will have far-reaching consequences for many employers - they can expect hefty income tax bills from the Dutch Tax Authorities.
This blog post is based on articles translated from Dutch to English by Tip Top Translator and edited by Tip Top Lawyer
