The legal nature of crypto-currencies is one of the key burning issues in today’s industry. Nowadays, more and more jurisdictions are regulating the use of crypto-currencies by classifying them either as a commodity, currency or something else (e.g. Germany classified crypto-currencies as “unit of account”). With that in mind, where does Serbia stand in the new crypto-world?
In short, the usage of crypto-currencies is mostly unregulated in Serbia. The National Bank of Serbia (“NBS”) issued an official opinion stipulating that crypto-currencies may not be considered as a valid means of payment, consequently prohibiting banks and money exchange offices to accept or effect payments in these currencies. The NBS also noted that any individual or a company dealing with crypto-currencies is doing so at its own risk since no effective statutory remedies exist against potential abuse arising therefrom.
Interestingly, the 2017 Anti-Money Laundering and Financing of Terrorism Act is currently the only act in Serbia which explicitly mentions the use of virtual currencies. This act imposes several obligations to persons who engage in barter arrangements or sale and purchase transactions pertaining to virtual currencies – from obtaining identification details of the buyer to notifying the Serbian Anti-Money Laundering Administration regarding such transactions and similar. However, the effect of these provisions in practice is limited as the authorities lack in human resources who would closely monitor the implementation thereof.
So, if crypto-currencies are not considered a means of payment in Serbia – what are they? As things are now, the legal nature of crypto-currencies most likely falls within the scope of a “commodity” i.e. an intangible good. Therefore, general statutory provisions are applicable meaning that virtual currency trade is, in principle, free from any specific restrictions, aside from those already mentioned above.
That said, there is one key practical issue. As is the case with any new development, the Serbian Tax Administration has to pick up the pace and define a predictable and secure manner of calculating crypto-currencies’ market price. Otherwise, potential investors may be deterred from performing their virtual currency related business activities in Serbia as they are prevented from precisely calculating the applicable taxes in an unambiguous way.
The aforementioned especially goes for crypto-currency mining. Specifically, the fact crypto-currencies are not recognized as a currency or an immaterial asset leads to inability to levy taxes on the profit that the company accrues through mining thereof. As per Serbian law, it would be necessary that the company includes the profits accrued through mining in its annual financial statements in order to pay corporate profit tax. To make this possible, however, the Serbian Tax Administration must introduce provisions that would stipulate the exact means of levying taxes on crypto-currency mining in the legislation.
Therefore, it is only a matter of time when the authorities will regulate this matter more closely, hopefully by taking a page from crypto-friendly jurisdictions’ playbooks by introducing tax breaks, e-residency or similar. Until then, Serbia will remain to be a neutral jurisdiction which only recognizes the existence of the virtual currencies, but practically adds nothing to the table in terms of attracting crypto investments.