PLEASE NOTE: The description of bookkeeping procedures must be ready no later than 1 January 2023 for all companies with a financial year / income year following the calendar year.
In May 2022, the Danish Parliament passed a new bookkeeping act. The main headline of the new act is digitization – requirements for digital bookkeeping and digital storage of vouchers.
Who is covered by the new Bookkeeping Act?
As a general rule, all businesses in Denmark are covered by the new act. This also applies to business activities carried out in Denmark by foreign companies.
However, companies that are not obliged to submit an annual report according to the Danish Financial Statements Act are exempt from a number of the proposed requirements for digitizing the bookkeeping, if the net turnover in two consecutive income years does not exceed DKK 300,000.
Please note: The new Bookkeeping Act does not change the fact that associations that exclusively have a social, cultural, political, or humanitarian purpose and do not earn money for this through business operations are not required to keep books and thus are not covered by the requirement to use a digital bookkeeping system.
When does the Act come into force?
The Bookkeeping Act entered into force for most provisions on 1 July 2022 with effect from that date. However, provisions relating to digital bookkeeping systems will come into force according to the schedule below.
The requirement to use a digital bookkeeping system is expected to come into force (at the earliest) on 1 January 2024 for companies with an obligation to submit an annual report according to the Financial Statements Act's accounting classes B–D.
The requirement to use a digital bookkeeping system is expected to come into force (at the earliest) on 1 January 2026 for other companies subject to bookkeeping (e.g. accounting class A) with a net turnover of more than DKK 300,000.
The Act's requirements for the companies
Requirements for the use of digital bookkeeping systems
Companies must use a digital bookkeeping system that meets a number of general requirements. Providers of bookkeeping systems on the Danish market must have their bookkeeping system registered with the Danish Business Authority (“Erhvervsstyrelsen”). If you use one of these systems, it is the provider's responsibility to ensure that the requirements of the law are complied with.
Companies that use a bookkeeping system that is not registered with the Danish Business Authority (e.g. specially developed or foreign accounting systems) are themselves responsible for ensuring that the bookkeeping system used meets the requirements.
In connection with submitting the company's annual report to the Danish Business Authority, the company must report the name and VAT-number (“CVR-number”) of the provider of the digital bookkeeping system that the company uses. If the company uses a system that is not registered with the Danish Business Authority (e.g. a system developed in-house), the system in question must be reported.
The requirements for the use of digital bookkeeping systems will be introduced continuously over a number of years and will apply from 1 January 2024 at the earliest for companies in accounting classes B-D and from 1 January 2026 for companies in accounting class A.
E-invoicing
In the long term, it is intended that companies will be required to use e-invoicing for purchases and sales. A provision has been introduced in the Bookkeeping Act, according to which the Minister for Business, in consultation with the Minister for Taxation, can at a later stage lay down rules that require the use of e-invoicing in companies.
This is not included as a requirement at this time.
However, it is already a requirement that the digital bookkeeping systems that must be used according to the act must be able to support the use of e-invoicing.
Requirements for digital storage of accounting material
There will be a requirement that the company's registrations and vouchers are stored digitally. Not all documents must be stored in a digital bookkeeping system, but only those documents that are normally stored in widely used digital bookkeeping systems at all times.
We await the Danish Business Authority's detailed rules and clarification of this by executive order, but we expect that the requirement for digital storage will include purchase and sale documents.
In addition to vouchers and bookkeeping, accounting material also includes documentation for the content of notes and management reports, estimates in the annual report, voluntary accounts for external use etc. This additional material must be stored for five years, but there is no requirement for digital storage.
Storage can take place on a server with a provider or with a third party. There is a requirement that a digital backup copy of the bookkeeping and vouchers must be made on an ongoing basis and that this must be stored in a safe manner.
Requirements for ongoing reconciliation in relation to statutory reports
Companies subject to the requirements of the new Bookkeeping Act must prepare reconciliations in connection with statutory reports, including:
- VAT
- taxes
- duties
- annual- or semi-annual report
The reconciliations must be submitted no later than the date of the reporting deadline. There is no requirement that the reconciliations must be stored digitally, but they must be available upon request.
Requirement that companies must prepare a description of bookkeeping procedures
Companies required to maintain digital bookkeeping and storage must prepare a description of procedures for bookkeeping and storage of accounting material.
The Danish Business Authority has prepared a template that can be used as inspiration for the above description. If a company already has a description of its procedures, this can still be used, if necessary, with some adaptations.
The description must be available by 1 January 2023 for companies with calendar year accounts. Companies with other financial years must comply with the requirement in their next new financial year starting after 1 October 2022.
This means that the companies that had a year-end on 30 September 2022 must first comply with the requirement for the financial year or income year starting on 1 October 2023.
We recommend that you familiarize yourself with the new rules already now and consider how you will achieve the goal of living up to the new rules. If you have an old bookkeeping system, implementing a new system takes time.