If you do business with VAT registered company from different country, you do not pay VAT upfront with purchase, but you report it at the end of quarter (monthly if you are big enough). You will actually never pay this VAT if you are VAT registered company as you will report it and ask for refund at the same time. On the the other hand, if you are doing business with local company you pay VAT with payment for service or goods and ask for refund at the end of quarter. Long term cost is same, but it blocks your resources (paid VAT) and it may be difference for some companies.