The recently implemented legislation concerning bookkeeping in Denmark

If your company hasn't yet digitized its accounts and finances, it's time to start getting ready to reorganize your work processes. The new Danish Bookkeeping Act requires most processes related to a company's accounts to be digitalized. If your company doesn't comply with the legislation, you could be fined up to DKK 1.5 million.

This article discusses what the new Danish Bookkeeping Act means for companies in Denmark. We'll cover the work processes required to meet the legislation's requirements assuming it is adopted in its current draft form. Additionally, we'll discuss changes to the Danish Financial Statements Act. These changes have been agreed upon as part of a reform package for the Danish economy and are expected to take effect on January 1, 2023, and thereafter.

What is the reason behind the introduction of the new regulations?

A broad political agreement has been reached on a package of various reforms for the Danish economy in 2021. The main objective of the reforms introduced is to make it significantly easier for all Danish companies to fulfill all accounting obligations, while at the same time significantly strengthening measures against various types of fraud.

The package primarily includes two key initiatives that Danish companies should pay particular attention to:

- Denmark's new Accounting Act, which requires the digitization of most of a company's accounting work processes. This means that companies must be prepared to reorganize their work processes to comply with the new regulations.

- The revised Danish Financial Statements Act, which includes changes to audit requirements. Companies will need to understand these changes to ensure their compliance with the new regulations.

Overall, the reforms are intended to simplify accounting for companies while making anti-fraud measures more effective.

The recently passed Danish Bookkeeping Act

The Danish government recently passed a new law that will go into effect on July 1 of this year. The law will apply primarily to Danish companies that generate revenues above the DKK 300,000 limit. Essentially, this means that companies that meet this revenue threshold will be required to store their accounting records digitally starting January 1, 2023.

While some Danish companies have already implemented various digital systems for handling all their accounting documents, others may not yet have had time to do so. For those companies that have not yet done so, the new law will absolutely require them to begin the process of digitizing their entire accounting records. Alternatively, they will have to ensure that their existing systems and processes comply with the new law. A significant portion of Denmark's more than 300,000 companies are expected to be affected by the new law.

What modifications will be brought about by the new legislation on bookkeeping in Denmark?

If your company currently doesn't use digital methods to manage receipts, vouchers and accounting records, then the new Danish Bookkeeping Act will have a big impact on your daily work routine. The key changes introduced by the law are as follows:

- All accounting records must be stored digitally, and in compliance with GDPR rules. Companies are also required to maintain a backup copy of the records. The frequency of updating the backup copy will depend on the complexity of the business, number of transactions and their size. However, for companies with high transaction volume, they must create a daily backup.

- The definition of accounting records has been expanded to include the documentation of factual information provided in the company's annual report management's report.

- Companies have to follow simplified requirements for describing their procedure for recording transactions and storing accounting records.

- The Danish Business Authority is authorized to conduct a bookkeeping audit for companies that have not submitted their first annual report and those who have chosen to opt-out of auditing.

- The penalty for non-compliance is now significantly higher.

What needs to be digitally preserved?

As of January 1, 2023, it will be absolutely required to keep absolutely all accounting documents in digital-only format. This includes all receipts, records of transactions, descriptions of the company's accounting procedures, relevant audit information, documentation related to the annual report notes and management report, estimates and assessments made during the preparation of the annual report, accounts prepared in accordance with legal requirements, and any records or reports from auditors or their equivalents.

A penalty of as much as DKK 1.5 million may be imposed for failure to comply

A new accounting law will soon introduce much stricter regulations and higher penalties for non-compliance. The Danish Business Authority has the right to audit all companies that fail to file an annual report by the deadline or choose not to be audited. If a company doesn't have digital accounting records or can't make them available to the authorities, it could face much higher penalties. The maximum fine for non-compliance is as much as DKK 1.5 million.

Changes made to the Danish Financial Statements Act

A new legislative package recently introduced in Denmark makes significant changes to the law regarding financial statements prepared by companies. Money laundering provisions have been added, as well as requirements that all companies in high-risk sectors have an auditor's statement.

These changes are particularly significant for companies that are considered to be in high-risk sectors. Companies in 11 different sectors that have an annual net income of more than DKK 5 million for two consecutive years will have to obtain an auditor's statement. The 11 high-risk sectors include road freight transportation, moving services, restaurants, pizzerias, take-out establishments, ice cream parlors, event catering, other catering companies, cafes, pubs, nightclubs, data processing, hosting and similar services, Internet portals, wholesale trade in cars, vans and minibuses, and retail trade in cars, vans and minibuses.

Companies in high-risk sectors have a choice of an audit report, an expanded audit report, a review statement or a statement to assist in the preparation of financial statements. It should be noted that the list of high-risk sectors will be revised every two years based on experience and knowledge of the impact on compliance in these sectors.

In addition to the changes to the Danish Financial Statements Act mentioned earlier, there are several other significant changes that companies should be aware of.

I. Companies with a balance sheet total of more than DKK 50 million for two consecutive years, regardless of net revenue, will now be required to have an audit report or an extended audit report.

II. Companies must now state the number of employees, even if there are none.

III. The deadline for submitting annual reports has been extended from five to six months for companies in class B and C. However, the deadline remains four months for class D.

IV. There is now an addition of money laundering legislation which means that opting out of auditing is not possible if the decision-maker in the company accepts a fine or is convicted of violating company legislation, accounting legislation or tax and excise legislation. Furthermore, a company cannot opt out of auditing if a member of the management team has been entered in the bankruptcy quarantine register within the past two years.

V. If significant errors or deficiencies are found in a company’s bookkeeping, it is now possible to administratively order an audit.

VI. The new legislative package is expected to take effect on 1 July 2022 and come into effect from 1 January 2023. From this date, digital recording and storage of accounting records must be carried out for transactions made for financial years from 1 January 2023 and thereafter.

In conclusion, these additional changes to the Danish Financial Statements Act will impact various aspects of a company's financial reporting and it's important for businesses to be aware of these changes and ensure compliance.