Bookkeeping in Denmark is not just about keeping track of your income and expenses. It’s a legally required process that plays a critical role in tax compliance, business transparency, and financial decision-making. The Danish system emphasizes digital solutions, accuracy, and accountability. Whether you’re a small business owner, freelancer, or a foreign entrepreneur operating in Denmark, understanding the local bookkeeping standards is essential for running a smooth and successful operation. In this article, we’ll explore how bookkeeping works in Denmark, what your responsibilities are, and how to make the most of available tools and support.
Who Is Required to Keep Books in Denmark?
In Denmark, all businesses—regardless of their size or legal structure—are required to maintain accurate and up-to-date bookkeeping records. This includes sole proprietorships (Enkeltmandsvirksomhed), private limited companies (ApS), public limited companies (A/S), partnerships, and foreign companies with a presence in Denmark.
The obligation to keep books is defined in the Danish Bookkeeping Act (Bogføringsloven). Under this law, businesses must record all transactions that affect their financial status, including revenue, expenses, salaries, assets, liabilities, and equity changes. These records form the basis for preparing financial statements, VAT declarations, tax reports, and audits.
Legal Requirements and Retention Periods
Bookkeeping in Denmark must follow specific legal guidelines regarding structure, accuracy, and data retention. Some of the key requirements include:
- All bookkeeping must be done in a systematic and chronological manner.
- Records must be kept for at least five years from the end of the financial year.
- Documentation (invoices, contracts, receipts) must be stored securely and in a format that allows easy retrieval.
Although there is no obligation to keep records in Danish (English is accepted in practice), all amounts must be recorded in Danish kroner (DKK) unless special permission is granted. Moreover, documentation can be stored digitally, which is now the standard for most businesses operating in Denmark.
Choosing a Bookkeeping Method – Manual vs. Digital
While it is still legally possible to keep books manually, Denmark has embraced a fully digital approach. Most companies use cloud-based accounting software to manage their books, which offers multiple advantages:
- Automatic synchronization with bank accounts and tax portals.
- Easy invoice creation and payment tracking.
- Real-time reporting and financial overviews.
- Simplified VAT and payroll declarations.
Popular bookkeeping platforms in Denmark include Dinero, Billy, e-conomic, and Microsoft Dynamics. Many of these platforms are tailored for small and medium-sized businesses and are available in both Danish and English interfaces.
Digital bookkeeping is not just convenient—it ensures faster compliance, reduces the risk of human error, and facilitates collaboration with external accountants and tax advisors.
VAT Reporting and Integration with SKAT
If your company’s annual revenue exceeds DKK 50,000, you are required to register for VAT (MOMS) and submit regular VAT declarations. Bookkeeping plays a critical role in this process because:
- All invoices must include the correct VAT rate (typically 25%).
- All incoming and outgoing VAT must be recorded and reported.
- VAT reports must be submitted through TastSelv Erhverv, the Danish Tax Agency’s digital portal.
Thanks to the digital bookkeeping systems available, many companies can generate VAT declarations directly from their accounting software. This integration ensures accuracy and significantly reduces the administrative burden.
Failing to report VAT on time or making frequent mistakes can lead to penalties, fines, or audits. That’s why keeping books in real time and using software with built-in VAT tracking is strongly advised.
Payroll Bookkeeping and Employee Reporting
If your business employs staff in Denmark, payroll must also be integrated into your bookkeeping process. Danish payroll involves:
- Reporting wages, taxes, and labor contributions to SKAT.
- Withholding and transferring A-tax (income tax) and ATP (labor market contributions).
- Issuing payslips and ensuring correct employer obligations.
Payroll reporting is usually done monthly and is highly regulated. Most businesses rely on external payroll providers or integrated payroll modules in their accounting software to ensure compliance.
Each wage payment must be backed by appropriate documentation and booked properly to reflect it in the financial statements. Mistakes in payroll bookkeeping can lead to legal consequences, so accuracy and automation are essential.
Annual Financial Statements and Reporting Obligations
At the end of each fiscal year, companies must prepare financial statements based on their bookkeeping records. The complexity of these reports depends on the size and structure of the company. For example:
- Sole proprietors and small businesses may only need basic profit and loss accounts.
- ApS and A/S companies must prepare a full set of financial statements, including a balance sheet, income statement, and notes.
In some cases, especially for medium and large companies, these statements must be audited and submitted to the Danish Business Authority (Erhvervsstyrelsen).
Bookkeeping accuracy throughout the year ensures that financial statements can be prepared quickly and without discrepancies. If your books are disorganized, this process becomes time-consuming and costly.
Common Bookkeeping Mistakes to Avoid
While Denmark’s bookkeeping environment is designed to be user-friendly, many businesses still fall into avoidable traps. Common mistakes include:
- Not reconciling bank statements regularly.
- Missing invoice numbers or issuing non-compliant invoices.
- Delaying VAT reporting or payroll submissions.
- Failing to document transactions properly.
- Using outdated or incompatible bookkeeping software.
These mistakes can trigger audits, fines, or tax issues. The best way to avoid them is to keep books consistently, use the right tools, and work with professionals when needed.
