Accounting plays a crucial role in the financial health and legal compliance of any business in Denmark. Whether you are starting a small enterprise, running a medium-sized company, or expanding your operations from abroad, understanding the rules of Danish accounting is vital. From bookkeeping standards and tax reporting to the use of digital tools and audit requirements, this guide offers a comprehensive overview of what businesses need to know about accounting in Denmark.
Danish Accounting Laws and Regulatory Framework
The accounting system in Denmark is primarily governed by the Annual Accounts Act (Årsregnskabsloven), which aligns with EU directives and international financial principles. This legislation outlines the structure, classification, and reporting requirements for financial statements, ensuring transparency and consistency across businesses.
Companies in Denmark are classified into four reporting classes (A to D), each with different accounting obligations:
- Class A: Sole traders and small partnerships with simple reporting needs.
- Class B: Small and medium-sized private limited companies (ApS).
- Class C: Larger private companies with higher reporting and audit demands.
- Class D: Publicly traded companies required to use IFRS.
The classification determines which accounting rules apply, including the level of detail in financial reporting and whether an audit is required.
Bookkeeping Rules and Documentation Requirements
All Danish companies must maintain accurate bookkeeping that reflects their financial activity in a clear and traceable manner. The principle of double-entry accounting applies, and records must be organized to support tax filings, audits, and business analysis.
Required documentation includes:
- Sales and purchase invoices
- Bank statements
- Payroll records
- VAT reports
- Contracts and receipts
Bookkeeping can be done in-house or outsourced, but all financial data must be retained for five years. Digital bookkeeping is widely accepted, and most companies use cloud-based accounting systems to streamline operations.
VAT, Income Tax, and Financial Reporting
Denmark has a robust and efficient tax system that relies on accurate accounting data for enforcement. Businesses must understand their obligations regarding VAT (moms), corporate income tax, and annual financial reporting.
- VAT: The standard VAT rate is 25%. Businesses must register for VAT if their annual turnover exceeds 50,000 DKK. VAT returns are typically submitted quarterly or monthly depending on revenue size.
- Corporate Tax: Companies are subject to a corporate income tax rate of 22%. Tax returns are filed annually and must be based on properly prepared financial accounts.
- Annual Reports: All companies are required to submit an annual report to the Danish Business Authority (Erhvervsstyrelsen). This report includes the balance sheet, profit and loss account, and notes to the accounts. Deadlines vary by company size but generally fall within six months of the fiscal year-end.
Failure to submit correct and timely reports can result in penalties or dissolution of the company.
Auditing Obligations and Exemptions
Audit requirements in Denmark depend on company size and structure. Many small businesses are exempt from audit if they meet at least two of the following criteria for two consecutive financial years:
- Total assets below 4 million DKK
- Net revenue below 8 million DKK
- Fewer than 12 full-time employees
Companies exceeding these limits, or those in classes C and D, must have their accounts audited by a licensed auditor (Statsautoriseret revisor or Registreret revisor). Auditors ensure that financial statements comply with legal and professional standards, offering credibility and assurance to stakeholders.
Payroll and Employment Accounting
Companies employing staff in Denmark must comply with strict payroll accounting and reporting standards. Salaries are subject to A-tax (income tax) and AM-bidrag (labour market contribution). Employers are responsible for:
- Calculating gross-to-net pay
- Withholding employee taxes
- Paying employer contributions
- Reporting payroll via the eIndkomst system to tax authorities
Employers must also contribute to pension schemes, holiday funds, and social security programs. Mistakes in payroll can lead to fines and reputational damage, so many companies outsource this task or use integrated payroll software.
Digital Accounting and Software Integration
The Danish business ecosystem supports the use of cloud-based accounting software for efficiency and legal compliance. Many tools are available in Danish and are designed to meet local tax and reporting requirements. Common platforms include:
- e-conomic – Ideal for businesses needing advanced accounting features
- Billy – Designed for freelancers and startups
- Dinero – Focused on small companies and entrepreneurs
These platforms often include features such as automated VAT calculations, bank integrations, invoice management, and financial reporting. By adopting digital accounting, companies improve data accuracy, save time, and reduce manual errors.
Accounting for Foreign-Owned Companies in Denmark
Foreign companies operating in Denmark must follow Danish accounting laws, even if their parent company is abroad. Requirements include:
- Registering a Danish branch or subsidiary
- Maintaining accounting records in Danish (or with translation available)
- Complying with Danish tax and audit rules
Companies must also appoint a local representative and may need a Danish business bank account. Many foreign businesses partner with local accounting firms to ensure smooth operations and full regulatory compliance.
Accounting in Denmark is structured, transparent, and essential to successful business operations. From tax compliance and financial reporting to digital bookkeeping and payroll, companies must follow clearly defined rules to stay compliant and competitive. Whether you’re launching a small ApS or managing a multinational branch, understanding the Danish accounting environment helps you minimize risks and maximize efficiency.