Also called BT-120, BT-121, exemption reason code
When an invoice does not charge VAT, EN 16931 requires it to state why. That is the exemption reason: free text in BT-120, or a code in BT-121. It is required for the exempt, reverse charge, intra-community supply and export categories.
BT-120 is free text and BT-121 is a code from a fixed list. Either satisfies the requirement, and supplying both is fine and often clearest for a human reader.
The text is not validated for meaning. The standard checks that a reason exists, which means an unhelpful reason passes validation and still fails an audit.
Most accounting systems store the VAT treatment as a flag and never had a field for the justification, because a paper invoice carried it as a line of boilerplate somewhere on the page.
When that data is mapped into a structured invoice, the flag maps cleanly and the boilerplate has nowhere to go. The result is a technically well formed invoice that fails on a field nobody knew they held.
Conditional field rules, where one thing you sent makes another mandatory.
