Starting a business in Denmark is an exciting opportunity for both local and international entrepreneurs. Known for its efficient administration, transparent legal system, and strong support for innovation, Denmark consistently ranks as one of the easiest countries in the world to do business. However, like in any country, proper accounting is key to running a successful and legally compliant company. For new business owners, understanding the basics of Danish accounting is essential. This article outlines everything you need to know about accounting in Denmark – from legal obligations and VAT registration to digital bookkeeping and common challenges.
Accounting Obligations for Danish Businesses
Every business operating in Denmark is required to maintain proper accounting records under the Danish Bookkeeping Act (Bogføringsloven). This law applies to all registered businesses, regardless of size or legal structure – including sole proprietorships (enkeltmandsvirksomhed), private limited companies (ApS), and partnerships (I/S).
The main accounting Denmark responsibilities include:
- Recording all business transactions systematically and accurately.
- Keeping financial records and source documents (e.g., invoices, receipts) for at least five years.
- Ensuring that accounting data reflects the real financial position of the business.
- Using a digital accounting system compliant with Danish requirements (mandatory as of 2024 for most businesses).
While it’s possible to manage accounting internally, many business owners – especially those unfamiliar with the Danish system – choose to work with an accountant or use accounting software to stay compliant.
Registering for VAT in Denmark
Value-added tax (VAT), known locally as moms, is a central part of the Danish tax system. Businesses are required to register for VAT once their annual revenue exceeds 50,000 DKK. Registration is done through the official business registration portal Virk.dk.
The standard VAT rate in Denmark is 25%, which applies to most goods and services. Once registered, a business must include its VAT number on all outgoing invoices and begin charging VAT to customers accordingly.
New business owners should also familiarize themselves with:
- How to issue correct VAT invoices.
- When to apply reverse charge rules (e.g., for cross-border transactions).
- How to deduct input VAT from business purchases.
Filing VAT Returns and Paying Taxes
VAT returns are filed through TastSelv Erhverv, the Danish Tax Agency’s self-service platform. Depending on your business’s size, VAT returns may be submitted:
- Monthly (for high-turnover businesses),
- Quarterly (most common),
- Semi-annually (for small businesses).
Returns must be filed on time, and any VAT owed must be paid by the deadline. The system is entirely digital, and the platform provides an overview of upcoming obligations, payment status, and historical submissions.
Failure to meet deadlines or errors in reporting can lead to fines and audits, so it’s important to implement a regular routine for VAT bookkeeping and submission.
Digital Bookkeeping Requirements
Denmark has been a frontrunner in digitalization, and accounting is no exception. As of July 2024, most Danish companies are legally required to use digital bookkeeping systems that meet specific standards set by the Danish Business Authority (Erhvervsstyrelsen).
This means businesses must:
- Use certified accounting software,
- Store financial documents and transaction records digitally,
- Ensure access to their data for audit and compliance purposes.
Popular accounting software in Denmark includes Dinero, Billy, e-conomic, and Visma, all of which are available in English and integrate with Danish banks and tax systems.
For many entrepreneurs, digital bookkeeping not only ensures compliance but also simplifies everyday tasks such as invoicing, expense tracking, and tax reporting.
Invoicing Standards and Documentation
Correct invoicing is essential for both cash flow and legal compliance. Every invoice issued in Denmark must contain:
- The seller’s name, address, and VAT number (CVR number),
- The buyer’s information (if applicable),
- A unique invoice number,
- Invoice date,
- Description of goods or services,
- The net amount, VAT rate, and total gross amount.
Invoices must be issued in sequential order and stored for at least five years. Digital invoices are standard, and businesses dealing with public institutions are required to use the NemHandel e-invoicing platform.
Failure to comply with invoicing rules can affect your VAT reporting and even result in financial penalties during audits.
Employing Staff and Payroll Accounting
If you plan to hire employees in Denmark, you must register as an employer with the Danish Tax Agency and report wages via the eIndkomst system. Payroll accounting includes:
- Withholding and remitting income tax from employee salaries,
- Paying contributions to the ATP pension scheme,
- Managing holiday allowances through FerieKonto,
- Issuing monthly payslips (lønsedler).
Denmark has strict labor laws and collective agreements that must be followed. As a result, many business owners outsource payroll processing to specialized payroll providers or accounting firms.
Keep in mind that errors in wage reporting can lead to employee dissatisfaction and legal issues – especially regarding holiday pay and tax calculations.
Annual Reporting and Financial Statements
All companies in Denmark must file annual reports, though requirements vary depending on the legal structure and company size. Sole proprietorships have minimal obligations, but limited liability companies (ApS) and larger businesses must prepare and submit:
- A balance sheet,
- A profit and loss statement,
- Notes to the financial statements,
- A management report (in some cases).
These reports must be filed with the Danish Business Authority through the Regnskabssystem platform, typically within five months after the end of the financial year. Larger businesses are also subject to independent audit requirements.
Even if you run a small company, it’s good practice to prepare an annual overview of your business finances – it helps with strategic planning, investor communication, and potential bank loans.
Using an Accountant vs. DIY Bookkeeping
Whether to manage your own books or hire an accountant depends on your experience, business size, and complexity. While Danish law does not require businesses to work with certified accountants, doing so can save time and help avoid costly mistakes.
Advantages of working with a Danish accountant:
- Compliance with all legal obligations,
- Timely tax filings and reports,
- Support with audits and inspections,
- Guidance on deductions, VAT, and cross-border transactions.
For small businesses and freelancers, using cloud-based accounting software is often enough. Many tools offer automation, templates, and bank integration, making it possible to handle bookkeeping with minimal effort.
Common Mistakes New Business Owners Make
Even with a clear framework, first-time entrepreneurs in Denmark can run into trouble. Some common accounting mistakes include:
- Not registering for VAT on time,
- Filing VAT returns late or incorrectly,
- Failing to document business expenses,
- Using outdated or non-compliant bookkeeping systems,
- Mixing personal and business finances.
To avoid these issues, it’s essential to stay organized, learn the basics of the Danish accounting system, and seek professional help when necessary.
Understanding accounting in Denmark is fundamental to running a successful business. While the system is modern and relatively easy to navigate, it requires attention to detail, punctuality, and a digital-first mindset. Whether you choose to manage your accounting yourself or rely on a professional, knowing your responsibilities helps you avoid penalties and build a financially sound business.
By staying informed and organized, you’ll not only meet your legal obligations but also gain valuable insights into your company’s performance and growth potential – putting you in a strong position to succeed in the Danish market.
