The allocation of inheritance in the presence of assets located in both France and Spain

Two situations must be distinguished:

The deceased was resident in Spain for tax purposes: Articles 30 and 34 of the agreement apply. Their real estate is taxed in the country where it is located, but bank assets are taxed in the country of last tax residence. Thus, the French bank balance of a deceased person who was resident in Spain must be taxed in Spain.

The deceased was resident in France for tax purposes: Articles 36 of the Convention of 7 January 1963 and Article 750 ter 1º of the French General Tax Code also apply.

Article 36 stipulates that, without prejudice to Articles 30 and 34, each State retains the right to calculate the tax on the inherited assets reserved for its exclusive taxation, according to the rate that would be applicable if all the assets subject to tax under its domestic legislation were considered. This is explained in Article 750 ter 1 of the General Tax Code, which provides for the taxation of movable and immovable property located in France or outside France.

The French tax authorities do not tax real estate located in Spain and only retain its value for the calculation of the overall effective tax rate as permitted by Article 36 of the agreement (Court of Appeal of Pau, Chamber 1, Judgment No. 17/2499 of 17 June 2015). Therefore, in application of Article 36 of the Convention, France retains the right to calculate the tax on inherited property reserved for its exclusive taxation, according to the rate that would apply if all property, whether French or not, were considered.