In a recently published decision of 11 March 2008, the German Federal Financial Court (Bundesfinanzhof) held that losses from permanent establishments in the US (i.e. non-EU/EEA) are not deductible for tax purposes in Germany. Details of the decision are summarized below. (a) Facts. In the tax year 1999, the plaintiff, a German limited liability company, participated in two partnerships established in the United States. On computing its taxable profits, the plaintiff deducted the losses from the participation in accordance with Sec. 2a(3) of the German Income Tax Act (ITA), which expressly allowed such a deduction. The local tax authorities denied...