Digital bookkeeping requirements under Denmark's new bookkeeping act

In May 2022, the Danish government introduced a new law on how companies should keep their accounting and financial records. The most important changes that the new law introduces are that from then on Danish companies will have to keep their records digitally and store receipts digitally as well.

New bookkeeping law in Denmark: Who it applies to and who is exempt

The new bookkeeping law in Denmark applies to all businesses, including foreign companies doing business in Denmark. However, some small companies with a net turnover of less than DKK 300,000 for two years in a row and are not required to submit an annual report, are exempt from certain requirements for digital bookkeeping.

It's important to note that the new law doesn't apply to associations that only have a social, cultural, political, or humanitarian purpose and don't earn money through business operations. Such associations aren't required to keep financial records and therefore aren't required to use digital bookkeeping systems.

Effective dates and requirements

Starting from 1st July 2022, most of the provisions of the Bookkeeping Act became effective. However, the regulations regarding digital bookkeeping systems will come into effect at different times.

For companies falling under accounting classes B-D of the Financial Statements Act and obligated to submit an annual report, the requirement to use a digital bookkeeping system is expected to come into effect at the earliest on 1st January 2024.

For other companies subject to bookkeeping (such as accounting class A) with a net turnover of more than DKK 300,000, the requirement to use a digital bookkeeping system is expected to come into effect at the earliest on 1st January 2026.

Requirements for digital bookkeeping systems that companies must meet under the act

Companies in Denmark are required to use a digital bookkeeping system that meets certain standards. If a company uses a system that is registered with the Danish Business Authority, the provider is responsible for ensuring that the system meets legal requirements. However, if a company uses a non-registered system, such as a foreign or custom-built system, they are responsible for ensuring it meets the requirements themselves.

When submitting an annual report to the Danish Business Authority, companies must report the name and VAT number of their digital bookkeeping system provider. If the system used is not registered with the Danish Business Authority, it must be reported.

The requirements for using digital bookkeeping systems will be phased in over several years. From January 1, 2024, companies in accounting classes B-D will be required to comply, and from January 1, 2026, companies in accounting class A will be required to comply.

E-Invoicing in companies under the new bookkeeping act

In the future, companies may be required to use e-invoicing for their purchases and sales. A new provision has been added to the Bookkeeping Act, allowing the Minister for Business, in consultation with the Minister for Taxation, to make rules that require companies to use e-invoicing.

However, this is not currently a requirement and there is no specific timeline for when it will become mandatory.

It is important to note that the digital bookkeeping systems that companies are required to use under the act must be capable of supporting e-invoicing, even if it is not yet required.

New digital storage requirements for company registrations and vouchers

The company will have to store their registrations and vouchers digitally, which means using a computer or an electronic device. Not all documents need to be stored this way, only the ones that are typically stored in digital bookkeeping systems.

We are waiting for more information from the Danish Business Authority, but we expect that purchase and sale documents will need to be stored digitally.

Other accounting materials like notes, management reports, and annual report estimates don't need to be stored digitally, but they should be kept for five years.

The digital storage can be done using a server provided by a third party. However, it's important to regularly create a backup copy of all the digital records and store it safely.

Ongoing Reconciliation Requirements for Statutory Reports under the New Bookkeeping Act

Companies that are required to comply with the new accounting law must create a document called a reconciliation for their official reports, such as those for VAT, taxes, duties and annual or semiannual reports. These reconciliations should be filed in a timely manner for each report. Although there is no obligation to keep digital copies of the reconciliations, they must be available upon request.

Accounting materials storage for companies

Companies that are required to keep digital records of their bookkeeping and accounting materials must create a plan outlining their procedures for doing so. The Danish Business Authority has provided a template that can be used as a guide, but companies may use their own existing plan with some adjustments if it already meets the requirements.

By January 1st, 2023, companies that follow a calendar year accounting period must have this plan in place. For companies that use a different financial year, they must comply with the requirement in their next financial year starting after October 1st, 2022. For instance, companies that had a year-end on September 30th, 2022 must comply with the requirement for the financial year or income year starting on October 1st, 2023.

It is recommended that companies familiarize themselves with these new rules and start planning how to comply with them as soon as possible. Implementing a new bookkeeping system can take some time, especially if the current system is outdated.