@Doomer @ So-chan
My guess is that it is similar to noble rights in actual history. You see, nobles were pretty much always exempt from taxes, it's the peasants that have to pay it. The way it works is that nobles have a land that they govern under authority from the king, for example, 3 villages that serve the local lord. These territories, while under the governance of the lord, are technically the property of the King, who lets the lord use it for their mutual benefit. The lord is also given territory for his own use, such as forests, fields, lakes, etc. that he has the peasants work on for free (as this is their obligation). The king's benefit is that a good lord can cause money to flow to him through mercantile trades tax, tax payed by the peasants (they pay to the lord and to the king and sometimes to the church too), and he is also given the loyalty and most importantly military help of the lord should the need arise. The lord himself does not have to pay a tax, as their tax is basically their duty as a noble.