From personal experience (I received a tax demand from the cadastral in August time this year ) the Cadastral estimate the value of what your house would have been at the time of buying and what you actually declared, and charge the 7% tax of the difference. However what they base their value on I don’t know because the same day I received the Multa for under declaration I was summoned into their office to discuss the new cadastral value because I had done improvements (all legally and paid for) She even told me that at the time of purchase my apartment was considered a virtual ruin (number 7 on a scale of 1 – 9 with 9 being a ruin)
Right across the street from me were apartments (typical 2 bed 1 bath, 65M with pool and garage) being sold for 87,000. This was one year after I bought so how they could assess my property as being this value as well beggars belief. It seems there is no logic or reason behind it. But to contest it would cost more than the actual fine and even then you aren’t sure of winning.
They aren’t interested in the seller because the seller has moved on whereas you are still there, although I have heard of UK residents being sent invitations from the hacienda in Spain to attend a meeting to discuss the sale of their property.
Interesting enough it appears at first glance that ONLY foreign residents are receiving Multas for under declaring – I don’t know of a single Spanish resident who has been fined (and believe me I know a lot of Spanish people locally). In fact when I showed the multa to a Spanish friend of mine he said he had never heard of anything like that before – and he is a property promoter.
So although under law both buyer and seller would be equally responsible – it is easier to chase the buyer because they are still in their property whereas the seller would need to be chased.
Hope this helps