BR-E-10: Exempt VAT needs an exemption reason

What it means

A VAT breakdown entry (BG-23) with category E (exempt from VAT) must carry a VAT exemption reason code (BT-121) or a VAT exemption reason text (BT-120).

Why it matters

EU VAT law requires an invoice without VAT to say why. The buyer and the tax authority rely on that statement to accept that no VAT was charged. Without it the invoice is rejected.

How to fix it

In your invoicing software, open the VAT setting for this category and fill in the exemption reason. Use for example the VATEX code VATEX-EU-132 with a text such as "Exempt under Article 132 of Directive 2006/112/EC", or the national provision that applies. Most programs then print it on every invoice that uses the category.

The rule as published

A VAT breakdown (BG-23) with VAT Category code (BT-118) "Exempt from VAT" shall have a VAT exemption reason code (BT-121) or a VAT exemption reason text (BT-120).

Business terms: BG-23, BT-118, BT-120, BT-121

Where this rule applies