Bookkeeping in Denmark
It's essential to understand how accounting operates in Denmark before starting a business there. Danish accounting includes all types of business structures, ranging from sole proprietorship to Danish private limited company. Depending on your chosen business structure, your bookkeeping will vary in difficulty, payment or reporting deadlines, documentation, taxes, and regulations. You can manage your bookkeeping independently or hire professional assistance. An experienced accountant can assist you with challenges that arise as a business owner, such as clarifying your responsibilities, addressing accounting and reporting issues, or navigating Danish accounting regulations and the Danish chart of accounts.How should Danish accounting be done?
Every entrepreneur doing business in the Kingdom of Denmark needs to be familiar with the most important issues in Danish accounting, if only so that they do not run the risk of heavy fines for not fulfilling their obligations.The most important issues concerning Danish accounting: The most important issues concerning Danish accounting:
- the aforementioned laws governing Danish accounting - danish accounting is regulated by specific laws that entrepreneurs must comply with. Familiarity with legal requirements ensures that businesses operate within the framework of the law, reducing the risk of legal repercussions and fines;
- systematisation of reporting obligations - the systematization of reporting obligations involves structuring and organizing the process of fulfilling various reporting requirements. This includes timely submission of financial statements, tax returns, and other mandated reports.;
- accounting for the various forms of business activity - different types of business activities require specific accounting considerations. Whether it's manufacturing, services, or trading, understanding the nuances of accounting for various forms of business activity is crucial for accurate financial reporting;
- chart of accounts - a chart of accounts is a systematic listing of all accounts used in the general ledger. It serves as the foundation for recording financial transactions accurately and categorically, facilitating organized financial reporting;
- auditing in Danish companies - danish companies are subject to auditing processes to ensure transparency and compliance with accounting standards. Entrepreneurs need to understand the auditing requirements and engage with auditors appropriately;
- taxes, insurance, benefits - knowledge of Danish tax regulations, insurance requirements, and employee benefits is vital. Proper management of tax liabilities and adherence to social benefits contribute to financial stability and legal compliance;
- factors that vary according to the business (deadlines, documentation, costs, rates) - certain factors, including deadlines for submissions, documentation requirements, costs, and applicable tax rates, can vary depending on the nature of the business. Entrepreneurs must be aware of these specific considerations;
- registration and permits - registering a business in Denmark involves complying with specific regulations and obtaining the necessary permits. Understanding the procedural requirements ensures legal standing and operational continuity;
- Danish accounting rules - in addition to legal statutes, Danish accounting rules provide guidelines for financial reporting. Adherence to these rules is essential for maintaining accuracy and consistency in financial records;
- issues related to registering your business in Denmark - entrepreneurs must navigate potential challenges and requirements related to business registration in Denmark, including documentation and compliance with local business laws;
- employer obligations - understanding employer obligations involves compliance with Danish labor laws, employee rights, and workplace regulations. This knowledge is crucial for fostering a positive work environment and avoiding legal issues;
- settlements and adjustments - SKAT - the Danish tax authority, SKAT, oversees settlements and adjustments related to tax obligations. Entrepreneurs need to be well-versed in these processes to ensure accurate financial reconciliation;
- Nemkonto, Tastsely, Pension, CPR, A- kasse, health card - DK - familiarity with administrative elements like Nemkonto (bank account for public payments), Tastselv (online tax services), Pension, CPR (Central Person Register), A-kasse (unemployment insurance fund), and health cards is crucial for efficiently navigating administrative and regulatory procedures in Denmark.
By proactively addressing these facets, entrepreneurs can establish a solid foundation for compliant and successful business operations in the Kingdom of Denmark. Regular updates and staying informed about changes in regulations further contribute to sustained legal adherence and financial stability.
Danish accounting from a legal perspective
Accounting in Denmark is regulated by several pieces of legislation. First and foremost are the legal statutes, but not only. Financial reporting requirements are set out in EU regulations and directives and adapted to Danish bookkeeping law. The areas of financial reporting are overseen by two bodies appointed by parliament:- DSFA, the Danish Financial Supervisory Authority;
- DBA, the Danish Business Authority under the auspices of the Ministry of Economic Affairs and Development, which oversees the financial reporting of unfunded business entities. [IMPORTANT: In practice, since 2007, the authority to set Danish accounting standards has been taken over by the DASC, the Danish Accounting Standards Committee, which, while it has no legal mandate, sets requirements for small, medium and large Danish companies].
- The Accounting Act 1998, which deals with the organization of accounting, the keeping of accounting records and business records. It follows from the Act that Danish accounting is mainly based on the accounting chart of accounts, the profit and loss account structure (sales revenue and 6 expense accounts) and the balance sheet account structure (assets, capitals, liabilities). In May of last year, the Danish parliament passed a new bookkeeping Act impacting the Danish Bookkeeping Act (Act no. 700 of 24 May 2022), that is meant to replace the old bookkeeping act. The focal point of the new act is digitization, specifically outlining general requirements that digital bookkeeping and digital storage of accounting records and vouchers are stored digitally. The enforcement of the new Act was postponed at the beginning of December 2022, primarily attributed to the delay in the formation of a new government. The primary goal remains to enhance the effort against tax fraud and it requires companies to maintain digital records and prepare a description of their bookkeeping process.. There will be a stipulation mandating the digital storage of the company's registrations and vouchers and automation of administrative processes. The system is required to adhere to established IT security standards, encompassing robust user and access management. Additionally, it is mandated that, at a minimum, a complete backup copy of the digital accounting system must be stored with a provider or another third party, meaning externally in relation to the company. Not all documents must be stored in a new digital bookkeeping system; rather, only those documents that are typically stored in widely used digital bookkeeping systems at all times must comply with the requirements.
- The Financial Reporting Act 2001 (DFSA, as amended in 2015), which contains provisions relating to the preparation of financial statements. It speaks of two variants of the income statement - comparative and calculation. The Danish income statement templates do not hide the net profit deduction templates. The statements refer to the classes into which Danish companies are divided.
- The Danish parliament has passed a new Bookkeeping Act, scheduled to come into effect in 1 January 2024. The danish Bookkeeping Act (Bogføringsloven) and the Executive order establishes the principles for standard bookkeeping systems and technical requirements for digital bookkeeping system in Denmark by 2026. Nevertheless, it is already a requirement that the digital providers of digital accounting systems, in accordance with the legislation, must be able to support the use of e-invoicing in Denmark. Accounting system providers are obligated to ensure that the IT systems they offer comply with the legislative requirements for digital accounting systems. Before being marketed in Denmark, bookkeeping system needs to be listed in the public register of standard digital bookkeeping systems. Existing providers of bookkeeping and digital accounting systems must align with the new requirements and register with the Danish Business Authority by 31 October 2023. Danish Virk intends to release a list of registered standard accounting systems that meet the requirements by January 2024. For businesses utilizing a non-registered (e.g , proprietary) accounting system and not using services of any provider of a digital system, the effective date these systems will come into force by July 1, 2024. As per the proposed provisions of the new Bookkeeping Act, the Danish Business Authority is strategizing to introduce B2B e-invoicing in stages over the upcoming years.
How reporting obligations are classified
The preparation of financial statements is the basis for company accounting in Denmark. The Financial Reporting Act brings together the rules on their preparation.
Class A includes private Danish companies with up to 10 full-time employees. Total assets should not exceed DKK 7 million and annual net turnover should be less than DKK 14 million. Class A companies must not keep financial statements, they only have to prepare tax reports.
Class B includes private and public limited liability companies (such as Danish LLC), limited partnerships, commercial foundations and other companies with up to 50 full-time employees. Total assets must not exceed DKK 36 million and annual net turnover must not exceed DKK 72 million. In contrast to Class A, companies in Class B are required to prepare financial statements.
The International Financial Reporting Standards contain recommendations on, among other things, the measurement, presentation and recognition of information. For Class B companies these recommendations are optional, for Class C they are mandatory.Class C includes medium and large companies, limited partnerships, private and public limited liability companies, commercial foundations and all other companies with more than 50 full-time employees. Total assets must be less than DKK 143 million and annual net turnover must not exceed DKK 286 million.
Class D consists of all state-owned joint stock companies. Their obligation is to prepare consolidated financial statements, which must comply with the rules given by the MSSF. The obligation expires on 1st May (after 4 or 6 years). Class D also includes listed companies. Listed companies are required to prepare separate financial statements.
The reports of such companies should include information such as:
- a summary of management's activities;
- profit and loss account;
- annual balance sheet;
- statement of changes in equity;
- cash flow statement;
- additional information.
What obligations are incumbent on a Danish employer?
An entrepreneur who has a business in Denmark should foremost be familiar with the Employment Document Act (Ansættelsesbevis loven). According to this Act, employees must receive a document with information on the most important working conditions. Working conditions are the result of an agreement between the employer and the employees. The agreement is established through trade unions or an association of employees and is called a collective agreement.Employees should comply with Danish labour law and follow Danish health and safety regulations, which can be found on the website of the Danish Labour Inspection Authority (UIP).
Danish businesses with employees should:
- provide their employees with the necessary personal protective equipment;
- provide a suitable working environment;
- instruct employees on health and safety rules at work;
- provide employees with health and safety training at least once a year;
- ensure that workers know and comply with safety rules when carrying out their work;
- prevent injuries at work;
- respect and treat their employees equally;
- ensure that workers are paid a decent wage;
- insure their employees against accidents and occupational diseases;
- continuously cooperate with the Danish Occupational Health and Safety Administration.
Persons operating companies within the EU who wish to post their employees to work in Denmark must comply with the rules set out in the following documents:
- EU Directive 96/71 of 16 December 1996 on the posting of workers abroad (Working Environment Act, Equal Pay Act, Act prohibiting discrimination in the labour market, Legal Relations Act, Act on Equal Treatment of Men and Women in Employment and Parental Leave);
- Danish Posting of Workers Act No 993 of 15 December 1999;
- Employees from other countries who have been posted to work in Denmark should, prior to their departure, obtain an A-1 form (confirming the payment of contributions for employee social insurance and specifying the foreign provisions for such insurance in the country).
Registering a company in Denmark
- Selecting the business structure
At the outset of the company registration process in Denmark, entrepreneurs need to make a crucial decision regarding the business structure they wish to adopt. This may involve choosing between a private or public limited company, each having its own set of advantages and considerations. - Choosing a business name
Following the determination of the business structure, the next important step is to carefully select a distinctive and original business name. It is imperative that the chosen name is unique and doesn't bear any resemblance to existing businesses, ensuring a clear and identifiable brand identity. - Setting up a business bank account
Establishing a dedicated business bank account is a fundamental step in the registration process. Entrepreneurs are required to deposit the capital necessary for initiating the company registration in Denmark. This account serves as the financial foundation for the new business entity. - Drafting the Articles of Association
The Articles of Association serve as the foundational document that encapsulates crucial details about the firm. This includes information about the company's objectives, structure, internal regulations, and other pertinent details. Careful preparation of these articles is essential for a smooth registration process. - Registering with the Danish Business Authorities:
To formalize the existence of the company, registration with the Danish Business Authorities is mandatory. This involves submitting a comprehensive application along with the necessary supporting documents. The Danish Business Authorities play a pivotal role in overseeing and regulating business entities within the country. - Registering for VAT
After the successful completion of the company registration process, the next step involves registering the business with the Danish Tax Authorities for Value Added Tax (VAT) purposes. This is a crucial aspect of compliance with tax regulations in Denmark. It is essential to complete this registration before commencing any commercial activities within the country. - Obtaining business licenses
For the company to engage in commercial operations seamlessly, it is necessary to obtain various business licenses and permits. These licenses are specific to the nature of the business and ensure that the company operates within the legal framework established by Danish authorities.
Documents in a Danish company
Information on registration, accounting and company operations in Denmark can be found on the website of the Danish Business Authority - www.erhvervsstyrelsen.dk. The most relevant issues that can be found on the website listed:- CVR (company registration number);
- company name;
- company address;
- contact details;
- type of business activity;
- date of incorporation and liquidation of the company;
- CPR (registration number, but not for private individuals);
- number of employees;
- details of owners, partners, management;
- accounting principles;
- information on accounting, financial reporting or balance sheets;
- credit information;
- related companies;
- sectors and sub-sectors;
- documents needed to set up a business.
Entrepreneur's perspective - what documents do you absolutely need to know?
From an entrepreneur's standpoint, gaining a comprehensive understanding of the Danish tax system involves familiarity with several key documents. These documents play a crucial role in ensuring compliance with tax regulations and providing transparency in financial matters.- Selvangivelse - the Selvangivelse is a pivotal document issued by the Danish Tax Authority (SKAT). This tax return form is dispatched to the address provided by the taxpayer during registration. Noteworthy is the flexibility in the address, as it doesn't have to be Danish; it can be a foreign address. This document serves as a comprehensive summary of an individual's financial affairs, aiding in the accurate calculation of taxes owed or refunds due.
- Oplyysningsseddel - a document summarizing the employee's earnings. Danish employers are obliged to issue such a document to their employees upon termination of employment. It is also worth mentioning that employers are obliged to keep documentation concerning their employees for a period of 5 years. This also applies to employees whose contract has been terminated.
- Tax return - the process of submitting the tax return in Denmark is a critical aspect of tax compliance. The tax return is typically submitted through the official website within 6 months of the conclusion of the tax year. It's important to note that the tax year spans 12 months but need not align with the calendar year. When the tax year concludes between 1st February and 31st March, the tax return is due by 1st August. Payment of taxes is scheduled twice a year, on 20th March and 20th November, contributing to the regular financial obligations of individuals and businesses.
- Arsopgorelse - the Årsopgørelse is a document dispatched by the Danish Tax Authority post-2nd July. This document holds the tax decision, indicating whether there is a refund or a surcharge. It serves as a comprehensive summary of the individual's financial standing for the fiscal year, providing a final overview of the tax obligations or entitlements.
Accounting for a sole proprietorship (enkeltmandszirksmhed)
Bookkeeping for a sole proprietorship is uncomplicated. The setup cost for such a business is at least DKK 10,000, equivalent to just over PLN 6,000 at the current exchange rate. Additionally, there is only one tax return and income is taxed only once. The income tax or, if applicable, VAT return is filed every three or six months via the SKAT website, using the LetLøn system. Twice a year, on March 20th and November 20th, advance income tax payments are due, which is the only settlement required for a sole proprietorship. Providing annual statements, which include a balance sheet, profit and loss account, and outline accounting rules, is voluntary. Business owners who pay taxes and contributions are eligible for the same health and pension benefits as employed individuals in Denmark.The "Forretningplan" is an essential requirement and refers to a comprehensive explanation of the entrepreneurial activity that one intends to carry out. This plan should encompass the vision, business concept, range of services, financial capabilities, and owner's duties. It is obligatory to register the business with the Danish Erhvervsstyrelsen, which can be done by accessing www.erhvervsstyrelsen.dk. To register, entrepreneurs are required to provide their personal identification number, CPR.
It's important to note that sole proprietors in Denmark have the flexibility to choose between different accounting methods, including cash-basis or accrual accounting. The choice of accounting method may impact how income and expenses are recognized for tax purposes.
Business owners should be aware that they are personally responsible for any debts or liabilities incurred by the business. Unlike other business structures, such as limited liability companies, there is no legal distinction between the owner's personal assets and the business assets in a sole proprietorship. This means that personal assets may be at risk to satisfy business debts.
While the initial setup cost is relatively low, sole proprietors need to keep track of their business expenses for tax deductions. Keeping detailed records of business-related transactions is crucial for accurate financial reporting and compliance with tax regulations.
Danish authorities, particularly SKAT (the Danish Tax Agency), may conduct periodic audits to ensure compliance with tax laws and regulations. Therefore, maintaining accurate and organized financial records is essential for the smooth operation of a sole proprietorship in Denmark.
Company accounting (B, C, D)
Accounting for Danish companies is more complex than running a sole proprietorship. Companies fall into classes B, C and D and are, for example, a general partnership (Interesselskab - I/S), a limited liability company (Anpartsselskab - ApS), a public limited company (Aktieselskab - A/S) or a limited partnership (Kommanditselskab - K/S).These companies are obliged to prepare reports according to the rules set out in the Financial Reporting Act. These reports should include:
- profit and loss account;
- a description of the management board's activities;
- a cash flow statement;
- statement of changes in equity;
- balance sheet;
- notes.
IFRS are the International Financial Reporting Standards. As the name suggests, these are standards, interpretations and frameworks adopted by the International Accounting Standards Board (IASB). The recommendations issued by IFRS enable companies to organize their management according to the 'comply or explain' principle. The 'comply or explain' principle is that companies are not obliged to implement the recommendations, but if they choose to do so, they should explain why.
In Denmark, there is still the Danish Accounting Standards Committee (DASC), which was established by the Danish Auditors' Committee (FSR) to issue non-mandatory technical standards and guidance on the preparation of financial statements for unlisted entities. Since 2004, the DASC has mainly been involved in analysing and preparing comments on exposure drafts, discussion papers and draft comment letters from the European Financial Reporting Advisory Group (EFRAG) and the IASB Board, providing technical information on current accounting issues and conducting outreach activities.
Changes to company law and accounting law are being introduced by the Danish Enterprise Authority. A person operating a company in Denmark is obliged to pay tax. If the annual turnover of the company does not exceed DKK 20,000, then corporation tax - CIT, which is 22%, must be paid. On the other hand, if the indicated amount is exceeded, VAT must be paid, which is 25%.
The European Union is currently assessing various EU e-invoicing options as part of its VAT in the Digital Age reforms, which were unveiled in December 2022. All public sector organizations in Denmark are required to accept electronic invoices through NemHandel, a platform also utilized by many private companies. NemHandel serves as a Service Metadata Publisher (SMP) for Peppol. There are two recognized formats for e-invoices in Denmark: the Peppol bis 3.0 standard and the Danish OIOUBL. However, the Danish government aims to eventually phase out NemHandel to align with the broader EU framework. The system that a company uses is required to have the capability to automatically send and receive electronic invoices, in addition to accounting for transactions in a publicly recognized standard accounting system. The system should have the capability to document company transactions, including the attachment of relevant files for each entry. Furthermore, it should be equipped to securely store both transaction records and associated attachments for five years. A provision has been introduced to the Danish Bookkeeping Act empowers the Minister of Business and Industry, in conjunction with the Minister of Taxation, to establish regulations mandating the utilization of e-invoicing by enterprises at a later date.
Audit of Danish companies
An audit is an audit of financial statements that Danish companies are obliged to carry out. Information on the conduct of an audit can be found in the Financial Reporting Act. The audit of the financial statements is carried out by independent, external auditors. They may be registered or authorised. For Class A and B companies, auditing is not mandatory and depends on the threshold of their annual turnover. Furthermore, companies in these classes can benefit from the type of audit of their choice and have the option to select the most favourable service from the available attestation services. The choices available include an audit of financial statements, accounting assistance or an audit and entrepreneurs make their choice after consulting with the auditor.There are several types of audit:
- financial audit, is a detailed audit of the financial statements. It is carried out by a chartered accountant. During the audit, he checks two things. Firstly, whether the information presented by the owner regarding finances and assets is true. Secondly, whether the financial statements have been prepared in accordance with Danish or international accounting principles;
- management audit - this type of audit assesses the efficiency and economy of Danish companies' financial management;
- QA is the Danish system for checking the quality of financial statements;
- compliance audit, which examines whether the companies' financial systems and operations comply with the law.
Additional information on auditing Danish companies:
- it is mandatory to include internal audit in the planning and modification of accounting systems;
- the Danish Financial Supervisory Authority (FSB) follows the International Standards on Auditing (ISAs);
- both auditor appointees (auditors, state-authorized accountants, or SPAs) and audit firms are audited every six years. The audit is carried out by the Audit Oversight Authority, which was established by the DBA;
- the Auditor General's Act sets out good audit practice. According to this principle, the internal audit function should not be dependent on the head of the entity for the planning of its activities, implementation and organization, and the internal auditors should have insight into the necessary information;
- in 2011, three Danish organizations, the Danish Committee of Auditors (FSR), the Danish Institute of Certified Public Accountants (FRR) and the association for young accountants and trainees (REVIFORA) joined forces. From this merger the FSR, a professional accounting organization, was formed. Its tasks include auditing accounting, auditing financial statements or dealing with accounting and taxation in Danish companies.
Danish chart of accounts
The most important account groups in the Danish Accounting Chart of Accounts relating to the profit and loss account structure:- Account group: net revenue from sales of goods; account number: 1100; account name: sales of goods.
- Account group: sales; account number: 2100; account name: sales.
- Account group: other external expenses:
- account number: 3100; account name: advertising cost,
- account number: 3200; account name: local costs,
- account no: 3300; account name: cash shortage,
- account no: 3400; account name: exported vehicle costs,
- account no: 3900; account name: other costs.
- Account group: process costs:
- account number: 4100; account name: salaries,
- account number: 4200; account name: pension allowance.
- Account group: depreciation:
- account number: 5100; account name: depreciation of means of transport,
- account number: 5200; account name: depreciation of equipment.
- Account group: interest; account number: 6100; account name: interest (income).
- Account group: interest; account no: 7100; account name: interest (expenses).
- Account group: extraordinary items:
- account number: 8100; account name: extraordinary gains,
- account number: 8200; account name: extraordinary losses
- Account group: taxes; account number: 9000; account name: corporate income tax.
- Account group: fixed assets:
- account number: 112; account name: tangible assets,
- account number: 11120; account name: cars,
- account no: 11121; account name: write-offs on cars,
- account no: 11130; account name: furniture,
- account no: 11131; account name: depreciation allowances for furniture.
- Account group: current assets:
- account no: 121; account name: inventories,
- account number: 12110; account name: composition,
- account no: 122; account name: accounts receivable,
- account no: 12210; account name: receivables from recipients,
- account no: 12220; accruals.
- account no: 123; account name: cash,
- account no: 12310; account name: cash,
- account no: 12320; account name: bank account,
- account number: 1230; account name: savings account.
- Account group: capitals:
- account number: 121; account name: share capital,
- account no: 134; account name: reserve capital,
- account no: 135; account name: financial result.
- Account group: liabilities:
- account number: 141; account name: long-term liabilities,
- account number: 14110; account name: mortgages,
- account no: 142; account name: current liabilities,
- account no: 14210; account name: revolving credit,
- account no: 14220; account name: receivables,
- account no: 14230; account name: pension supplement,
- account no: 14240; account name: from labour market contributions,
- account no: 14250; account name: from taxes,
- account number: 14250; account name: tax settlements,
- account number: 14290; account name: other liabilities.
Arrangement of account classes relating to the balance sheet:
- account number: 21000; account name: profit and loss account,
- account number: 22000; account name: balance sheet.
Costs in a Danish company
Bookkeeping in Denmark also involves dealing with costs, accounts, balance sheets and assets. According to the Danish balance sheet formula, assets are grouped into debt and equity according to the principles of increasing liquidity, i.e. from the least liquid (intangible assets) to the most liquid (cash).- Non-current assets:
- intangible assets:
- completed development projects including concessions, patents, trademarks and similar rights that originate from development projects,
- development projects in progress and prepayments for IPI,
- goodwill,
- acquired concessions, patents licences, trademarks and similar rights;
- property, plant and equipment:
- land and buildings,
- plant and machinery,
- property, plant and equipment in progress and advances for fixed assets,
- other (equipment, fixtures and fittings);
- financial assets:
- shares in related parties,
- receivables from related parties,
- other receivables,
- equities,
- receivables from owners and management,
- investments in associates,
- receivables from associates,
- other investments.
- intangible assets:
- Current assets:
- inventories:
- raw materials and consumables,
- advances for goods,
- work in progress,
- finished goods and merchandise;
- receivables:
- trade receivables,
- receivables from owners and management,
- receivables from associates,
- receivables from related parties,
- other receivables,
- contracts for work in progress,
- settlements;
- investments:
- equities,
- investments in related parties,
- other investments;
- cash:
- liabilities,
- accruals,
- current and non-current liabilities (mortgages, other debts incurred by issuing bonds, loans, profit shares in debt instruments, advances received from customers, trade payables, payables to related parties, payables to associates, income tax, other liabilities),
- capitals (paid-in capital, agio, revaluation reserve, other reserves, profit/loss),
- provisions (provision for pensions and similar obligations, provision for annual tax, other provisions).
- inventories:
Danish imports compared to Danish exports
Denmark's most important trading partners include the member states of the European Union. The main partners are Germany, the Netherlands, the United Kingdom and Sweden.Denmark's cooperation with other countries is handled by the Danish Export Council (Eksportradet).
To be able to apply the preferential rate, certificates of origin of the products (EUR1) must be presented to Danish customs officials. Customs duty is calculated on the customs value of the goods. This means that the price on the invoice is what counts. Transport and insurance costs are included in the quoted price. You must pay the so-called MOMS, that is VAT of 25%, must also be paid. The tax applies to agricultural products, industrial products and almost all services.
Denmark's most common exports are food products, chemicals and chemical products, as well as live animals. In contrast, it imports the most equipment and machinery, processed products, chemicals and chemical products.
All food products should be labelled and meet standards for the use of preservatives. The label should include the composition in Danish. If a commodity may pose a risk to life and health, such as a medicine or chemical, a warning should be placed on the packaging of that commodity. In addition, entrepreneurs who wish to import goods containing hazardous chemicals in them are obliged to check whether the transported substances are on the EINECS list of hazardous substances. Any chemical substances outside the list must be notified to the Ministry of the Environment. When placing a chemical substance on the Danish market, we have to assign it to one of two groups - for commercial or private use.
It is also useful to know who to contact in order to obtain licences or permits. When it comes to importing food products, you need to report to the Danish Veterinary and Food Inspectorate (www.vfd.dk). At the aforementioned Ministry of the Environment, there is the Department of Chemical Products, to which entrepreneurs wishing to introduce cosmetics, cleaning products or detergents into the Danish market should report. Furthermore, entrepreneurs are obliged to provide the Department with a report on the activities of their companies. The report shall be delivered annually, by 1 February.
According to the New Approach Directives, the following industrial products should be CE-marked:
- toys,
- machinery,
- the efficiency of water power boilers,
- equipment used in potentially explosive atmospheres,
- non-automatic weighing equipment,
- gas appliances,
- simple pressure vessels,
- energy efficiency of freezers and refrigerators,
- telecommunications terminal equipment,
- recreational boats and yachts,
- gas appliances,
- diagnostic equipment (in vitro),
- low-voltage electrical products,
- explosives for civilian use,
- gas appliances,
- cable systems for the transport of persons,
- construction products,
- electromagnetic compatibility,
- active medical implants,
- lifts,
- personal protective equipment.
E-Invoicing in Denmark
Following the European standard EN 16931 and the VAT in the Digital Age (ViDA) proposal, the Danish Tax Administration has actively promoted the adoption of electronic invoicing. Denmark has been at the forefront of e-invoicing, making it mandatory for Business-to-Government (B2G) transactions since 2005. The recent enactment of the new Bookkeeping Act in Denmark introduces significant changes, with a phased implementation plan for Business-to-Business (B2B) e-invoicing set to unfold in the coming years.Scheduled to take effect in January 2024, the Danish parliament has passed a new Bookkeeping Act, ushering in digital reporting obligations and other impactful changes for companies in Denmark.
Timeline for B2B e-invoicing implementation:
- 2005: Mandated e-invoicing for government authorities and vendors (B2G transactions).
- January 2024 - January 2026: Phased implementation period for new reporting obligations and potential introduction of B2B e-invoicing.
E-invoicing requirements:
- E-invoice format: In Copenhagen, the OIOUBL (Offentlig Information Online - Universal Business Language) format is exclusively used. Alternatively, inclusion of an EAN/GLN number in a Peppol formatted invoice can be utilized.
- Full VAT invoice: Required for sales values exceeding 5,000 DKK (EUR 670), including details such as EAN/GLN number, invoice issuance date, supplier information, customer details, description of goods or services, VAT rate and base, and total VAT amount.
- Simplified VAT invoice: For transactions below the specified sales value, a simplified invoice includes EAN number, invoice issuance date, supplier information, description of goods or services, and total VAT charged or percentage.
E-invoices can be transmitted through the NemHandel platform or the Peppol network. While NemHandel is presently mandatory for public sector organizations, there are expectations of its phased-out implementation to align with EU standards.
The Danish Bookkeeping Act plays a pivotal role in shaping the landscape of mandatory Business-to-Business (B2B) e-invoicing. It mandates the establishment of digital reporting systems for specific accounting classes by 2024, with a subsequent extension to encompass all classes by 2026.
DDD Invoices, serving as a certified Peppol Access Point, offers various advantages. It seamlessly integrates into existing invoicing systems, whether they are Enterprise Resource Planning (ERP) solutions or Customer Relationship Management (CRM) platforms. Furthermore, DDD Invoices facilitates global connectivity for sending and receiving electronic documents, ensuring compliance with local regulations. The service streamlines the invoicing process through an automated and secure approach.
Hile Business-to-Government (B2G) transactions mandate electronic invoicing, the transition to mandatory Business-to-Business (B2B) e-invoicing is anticipated in the near future. The accepted e-invoice formats include the Peppol standard and the Danish OIOUBL. The Danish Bookkeeping Act is highlighted in the FAQs, elucidating its role in governing digital reporting and outlining future e-invoicing requirements for B2B transactions.
Advancements in Denmark's Bookkeeping Act
In May of the preceding year, the Danish parliament endorsed a comprehensive set of reforms impacting the Danish Bookkeeping Act (Act no. 700 of May 24, 2022), thereby superseding the prior legislation that had been operative since 1999. The primary aim remains focused on bolstering the efforts against tax fraud and elevating the level of digitalization in the accounting records of Danish companies.The mandate for digital accounting encompasses the following two fundamental accounting obligations:
- Logging the company's transactions in a digital accounting system.
- Archiving the records and accompanying attachments that validate the transactions within a digital accounting system, or alternatively, maintaining a complete backup of the records on a server controlled by a vendor or another third party.
The Danish authority has recently revised the timeline pertaining to the obligations associated with digital accounting systems. Subsequently, the authority will release mandatory implementation dates for companies.
Here is the updated schedule:
- February 1, 2023: Commencement of requirements for digital standard accounting systems.
- October 31, 2023: Deadline for registration of providers offering standard bookkeeping systems with the Danish Business Authority.
- January 1, 2024: Registration of notified systems.
- Implementation deadlines have been deferred until further notice.
Specific and technical requirements are still pending confirmation. Drafts of the SAF-T system have been made public, signaling a phased implementation from 2024 to 2026.
The new Bookkeeping Act in Denmark mandates businesses to transition to digital accounting records, marking a significant shift with the potential to enhance financial tracking and decision-making processes. The use of a Danish authority-approved digital accounting system is now obligatory, subject to specific requirements outlined by the government through an executive order. To facilitate efficient verification and certification of suppliers, the Danish government plans to expand information availability on certification for digital suppliers.
Article 15 of the new legislation outlines three essential requirements applicable to all digital accounting systems, whether standard or specially developed:
- Ability to record company transactions with specified attachments for each entry and store records and attachments for a duration of five years.
- Compliance with recognized IT security standards, encompassing user and access management, along with ensuring automatic backup of records and attachments.
- Capability to automatically send and receive electronic invoices, as well as account for transactions in a standardized public accounting system.
In the realm of e-Invoicing, Denmark has mandated the use of e-Invoices in the Peppol BIS 3.0 format via the Peppol network for government authorities and their suppliers since 2005. There are considerations for introducing electronic ordering and cataloging for specific goods categories in the public sector, promoting the adoption of e-commerce.
In the B2B sector, companies have the flexibility to utilize e-Invoicing at their discretion, contingent upon mutual agreement between the involved parties. Stay tuned for updates, as the Danish Business Authority and EDICOM will keep you informed about any developments and upcoming dates.
Glossary of important terms
A-kasse - unemployment insurance fund. It is optional insurance, but if you want to receive benefits after losing your job, you must become a member of a-kasse.TastSely - an eight-digit code to help you settle your accounts with the Tax Office electronically. It can be ordered at www.skat.dk.
Skat til udbetaling - this phrase stands for the amount of tax refund. It is placed on the tax decision from the tax office.
Restkat til betaling - this expression stands for the amount of the surcharge to the Tax Office. It is also placed on the tax decision.
NemKonto - an employee bank account into which the tax refund from the Tax Office and the payment is transferred.
Feriepenge - holiday benefits to which persons legally employed in Denmark are entitled. A Danish employee is entitled to 2.08 days of holiday for each month worked, making a total of 5 weeks. The holiday period in Denmark runs from 1st May to 30th September. And it is during this period that a minimum of 3 weeks of accrued holiday must be taken. Importantly, you can apply for the benefit up to six months after you have finished working in Denmark. In that case, you must remember to register with the municipality before leaving the country. Feriepenge is paid into your NemKonto for up to three months for the previous tax year. It can only be used in the following holiday year.
Feriekonto - a special fund into which Danish employers are obliged to pay holiday contributions for employees. The rate is 12% of gross salary, less 8% allocated for social purposes.
Årsopgørelsen - tax decision, which can be found on the Danish Tax Administration's website.
Personfradrag - tax relief to which Danish residents who have worked in the country for more than 12 months are entitled.
Pension - a private Danish pension that is accumulated in private pension funds (Danica Pension, PFA Pension, Pensiondanmark, Industries Pension).
Folkepension - Danish state pension. All Danish citizens over the age of 65 are entitled to a state pension.
ATM - Danish employee schemes belonging to the second pension pillar. They cover all Danish citizens who have reached the age of 16.
DK - Danish health card, which must be set up by anyone planning to stay in Denmark for more than 3 months. It is issued together with a CPR number and guarantees free medical care. However, it does not apply to dental treatment.
