# BR-O-10 Not-subject-to-VAT breakdown needs an exemption reason

A VAT breakdown (BG-23) with VAT category code (BT-118) "Not subject to VAT" (O) shall carry a VAT exemption reason code (BT-121) meaning "Not subject to VAT", or a VAT exemption reason text (BT-120) stating "Not subject to VAT" (or the equivalent standard text in another language).

## Problem Description

> **ERROR**: EN 16931 VAT category rule

## Context and Significance

The exemption reason explains to the buyer and the tax authority why no VAT applies to a supply outside the scope of VAT; the code is VATEX-EU-O. In practice, the error occurs when the note appears only on the PDF, or when a code for exempt supplies is used instead of VATEX-EU-O.

## Solution

Add cbc:TaxExemptionReasonCode = VATEX-EU-O or cbc:TaxExemptionReason = "Not subject to VAT" to the O TaxCategory.

- [Validate XML](/en/xrechnung-validator?source=resource&rule=BR-O-10)
- [Convert invoice](/en/pdf-to-xrechnung?source=resource&rule=BR-O-10)

## Valid Examples

- O breakdown with BT-121 = VATEX-EU-O
- O breakdown with BT-120 = "Not subject to VAT"

## Invalid Examples

- O breakdown with neither BT-121 nor BT-120 provided

## Code Examples

### Valid XML
```
<cac:TaxCategory>
  <cbc:ID>O</cbc:ID>
  <cbc:TaxExemptionReasonCode>VATEX-EU-O</cbc:TaxExemptionReasonCode>
  <cbc:TaxExemptionReason>Not subject to VAT</cbc:TaxExemptionReason>
  <cac:TaxScheme><cbc:ID>VAT</cbc:ID></cac:TaxScheme>
</cac:TaxCategory>
```

### Invalid XML
```
<cac:TaxCategory>
  <cbc:ID>O</cbc:ID>
  <cac:TaxScheme><cbc:ID>VAT</cbc:ID></cac:TaxScheme>
</cac:TaxCategory>
```

## Affected Fields

- [BT-118 VAT category code](/resources/xrechnung/bt-118-vat-category-code)
- [BT-120 VAT exemption reason text](/resources/xrechnung/bt-120-vat-exemption-reason-text)
- [BT-121 VAT exemption reason code](/resources/xrechnung/bt-121-vat-exemption-reason-code)

## Related Rules

- [BR-O-01](/resources/kosit-validator-errors/br-o-01-not-subject-vat-breakdown-required)
- [BR-O-09](/resources/kosit-validator-errors/br-o-09-not-subject-tax-amount-zero)
- [BR-CL-22](/resources/kosit-validator-errors/br-cl-22-vatex-tax-exemption-reason)

## Validation Tools

- [Official KoSIT Validator](https://github.com/itplr-kosit/validator): Run the official KoSIT validator with the XRechnung configuration to check EN 16931 and XRechnung rules.
- [Convert PDF to XRechnung](/pdf-to-xrechnung): Find validation errors during conversion and review each correction.

## Related Resources

- [Official Specification](https://docs.peppol.eu/poacc/billing/3.0/rules/ubl-tc434/)
- [Test Suite](https://github.com/itplr-kosit/xrechnung-testsuite)
- [All validation errors](/resources/kosit-validator-errors): Overview of the EN 16931, XRechnung and Peppol validation rules explained here.