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Meet Europe’s newest tax haven and micro-state

Europe's newest "state" welcomed its first citizens this weekend, after a small group of libertarians declared independence for a patch of land on the border between Croatia and Serbia.

The "Free Republic of Liberland" has received no official recognition, but celebrated its first "Liberty Day" on May 1, doling out honorary citizenship to the first 100 attendees to arrive at the party in country.

Its "president", Vit Jedlicka, is a 31-year-old Czech, who is a former financial analyst and self-described libertarian. He said that long-term, he hoped Liberland could become a successful financial center due to its loose tax laws.

"I would categorize it as a tax heaven," Jedlicka said. "The reason why Liberland was created was that the rest of the world ended up being a tax hell."


The self-declared country of Liberland lies on the banks of the Danube River.
From the Liberland website
The self-declared country of Liberland lies on the banks of the Danube River.

Nearly 300,000 people have already applied for Liberland citizens, 80 of whom are billionaires, according to Jedlicka.

Jedlicka and two other Czechs formed the new state on April 13 on a patch of woodland near the Danube River between Croatia and Serbia in South East Europe. Liberland said the area was left unclaimed following a border dispute between Croatia and Serbia in the 1940s. For much of the 20th century, both states were part of Yugoslavia.

The new country measures only 2.7 square miles in area, meaning it would rank among Vatican City and Monaco as one of the world's smallest "micro-states."

Jedlicka said forming Liberland was an attempt to shake up the political status quo.

"I tried for five years to change something in politics, but taxes were still rising, regulations were more and more intruding into people's lives, so I sort of found out that I couldn't change it for better," Jedlicka told CNBC.

"My political opponents always told me I should create my own state to show how my liberalism would work. And then I did."

A 'frivolous act'

Liberland's coat of arms
From the Liberland website
Liberland's coat of arms

Neither Croatia nor Serbia has recognized Liberland's sovereignty. In an official statement sent to CNBC, the Serbian Ministry of Foreign Affairs described Jedlicka as a right-wing politician and said the "newly created country" was outside Serbia's territory.

"The Ministry also considers this a frivolous act which needs no further comment," the Serbian Ministry added.

A spokesperson for Croatia's Foreign Ministry reiterated a Facebook comment posted shortly after Liberland declared independence in mid-April.

"Virtual quips, no matter how interesting they occasionally sound, remain what they are—virtual quips, and for them we do not have any official comment," the spokesperson said.

But Jedlicka still hopes to gain recognition from other nations and has already set up an an office in Serbia that he plans to convert to an embassy.

'Live and let live'

Liberland's founders have pulled out all the stops, providing the country with its own laws, constitution, flag and motto: "To live and let live."

For those who missed gaining citizenship on Liberty Day, the country continues to accept citizenship applications online. Anyone is allowed to become a citizen as long as they have a clean criminal record and "do not have communist, Nazi or other extremist past."

Jedlicka said costs of developing and running the country would initially come from citizens, some of whom had already helped raise $15,000 to fund accommodation for the 20 volunteers running the presidential office.

Liberland will be run as a constitutional republic with elements of direct democracy, according to its website. Any currency will be accepted, including Bitcoin, Jedlicka said.