In recent years, German courts have repeatedly dealt with the tax treatment of partnerships under the German-American double tax treaty (GA-DTT). In these decisions cross-border payments were a particular issue of concern. The taxation of a “commercial partnership” („gewerblich geprägte“ Personengesellschaft), i.e. an asset managing partnership deemed subject to trade tax by virtue of its sole (unlimited) corporate managing partner, was the moot point. The U.S. partnership in question derived interest income from investments in rental real estate. In the U.S. this income was regarded as effectively connected with a trade or business and, consequently, taxed. The German Federal Fiscal Court (BFH), however, ruled that these activities merely qualify as asset management; therefore, the partnership neither has a trade or business under Art. 7 or Art. 11 para. 3 of the GA-DTT, respectively, nor derives income from real property pursuant to Art. 6 GA-DTT. Both income categories would have shifted the right of taxation to the U.S, whereas Germany would have been obliged to apply the exemption provision. According to the BFH, German interest holders in the U.S. partnership have to pay Germ...