Spain is one country with two systems as far as overseas property investors are concerned. European Union nationals living in Hong Kong pay less tax than Hong Kong Chinese buyers and have automatic right of residency in Spain. Hong Kong buyers must show they have sufficient resources to provide for themselves to gain residency.
While Hong Kong investors must pay 35 per cent capital gains tax when they sell a property, EU nationals only pay 18 per cent, Barbara Wood, director at buying agency The Property Finders, said. All other taxes are levied at the same rate for both groups of buyers.
A 7 per cent purchase tax is payable when buying a resale property, and a 1 per cent purchase tax and 7 per cent VAT are payable on new homes bought from a developer. Rental income is taxed at 24 per cent.
Legal, notary and registry costs amount to about 2 per cent of the purchase price, and mortgage costs about 3 per cent. Ms Wood said mortgages could be cheaper if the buyer took on the seller's mortgage, a common practice in Spain.
When buying at auction, fees range from 8 per cent for cash purchases to 15 per cent for mortgage-backed acquisitions. Bids can be taken over the phone, in writing or on the floor at auction houses such as Direct Auctions.
Ms Wood said rental returns were low on the Costa del Sol and Costa Blanca.