This article explains the exemption reason code (BT-121) prompt when issuing VAT-exempt Invoices in Qoyod, per the requirements of the Zakat, Tax and Customs Authority (ZATCA).
The Difference Between Zero-Rated and Exempt
- Zero-Rated (0%): the product is taxable at 0%, such as exports and qualifying medicines.
- Exempt: the product is entirely outside the scope of tax, such as certain financial services and residential property rentals.
Both require a reason code (BT-121) on the e-invoice, but the lists of codes are different.
When the Prompt Appears
When approving an Invoice that contains a line item classified as “Tax Exempt”, the system displays a window asking you to select an exemption reason code before submission.
Steps
- Create an Invoice and add the exempt line items (tax rate “Exempt 0%”).
- Click “Save and Approve”.
- A “Missing Exemption Reason” dialog appears with the list of affected line items.
- Select the appropriate reason code from the dropdown.
- Click “Save & Continue”.
Notes
- BT-121 is a unified code for both Zero-Rated and Exempt, but the code values themselves differ by exemption type.
- The code is mandatory in the XML file sent to the authority.
