This is a rule everywhere, in every nation with any serious tax system - otherwise it is a big loop hole for everyone and no taxes at all would be collected.

Example: a dutch company sells a product to dutch consumers. They have to pay VAT. However what if they setup a company in another country that first buys the products for 0.001 cents and then sells the products back for full price to the consumer.

Most, if not all, countries do not apply VAT on exports.

In the end it doesnt matter where it was produced. Its taxed based on where it was consumed.

When an economic union such as the EU refer to an internal market they mean stuff like this. But as a result all VAT in the EU are now almost identical (or else your own producers would be tempted to move the profit to another EU country)