[ddeck]

>Those tax rates - 20% VAT and 33% social taxes

I would expect that VAT is only relevant for products sold to Estonian residents and income/social tax only relevant if you employ residents of Estonia.

Income tax is typically based on residency, I believe the US is the only developed country in the world that taxes non-residents on income.

Disclaimer: I have not looked at Estonian tax law

[reidrac]

EU VAT doesn't work like that, Estonia is in the EU sigle market (and the Euro).

http://en.m.wikipedia.org/wiki/European_Union_value_added_ta...

You may be right in the income and social tax, but I suspect establishing a business in Estonia may require visiting the country at some point.

[ddeck]

As I understood it, as of 2015 EU digital goods VAT must be paid based on the VAT in the customers country, regardless of whether the sellers business is located inside or outside the EU.

If so, what's the downside of having your business based in Estonia vs the US with respect to VAT?

[jarek-foksa]

If you and your small business are based in the US then you could ignore the VAT nonsense when selling to the customers from the EU [1]. It's not in the interest of the IRS to make you pay taxes in Europe.

[1] http://www.happybootstrapper.com/2014/im-us-whatll-happen-ju...