Danish accounting

Accounting is an integral part of running a business, but in Denmark, it differs significantly depending on the type of company – if only in terms of difficulty. A sole proprietorship in Denmark operates under different rules, documents, and deadlines than, for example, limited liability company in Denmark or other various types of companies. The tax treatment of different legal forms will also be different.

Company accounting in Denmark includes the examination of expenses, income, and financial balance sheets for businesses. A certified accountant can be extremely helpful both in choosing the best form of business activity for oneself and in further accounting. Some companies also choose to use a accounting software. It is worth entrusting the company’s matters to a person specialized in professional accounting services, if only due to their knowledge of all kinds of accounting principles, laws and regulations on the basis, of which Danish accounting functions. The cooperation will also make it easier to go through the formalities connected with the rights and obligations of an entrepreneur. Find out about the accounting in Denmark and find the right solutions for your business.

Accounting in Denmark

Governing bookkeeping in Denmark is mandatory for anyone doing business. In order, to avoid severe penalties related to non-compliance with the obligations of an entrepreneur, there are many aspects to keep in mind, most notably:

• types of accounting depending on the legal form (sole proprietorship, danish limited liability company or different types of companies);
• accounting rules (and accounting in general) in the Kingdom of Denmark, arising from applicable laws and regulations (e.g. documents used, VAT rates, cost classification rules, chart of accounts, audits);
• VAT rates;
• formalities related to starting a business;
• obligations towards the office (deadlines, tax settlements, reporting, settlements, corrections);
• obligations of the employer in Denmark;
• residence permit in Denmark;
• identification number (CPR), bank account (NEMkonto), system login code (TastSelv);
• insurance, yellow health card (Sygesikringsbevis), state benefits;
• voluntary unemployment insurance (A-kasse).

As a member of the European Union (EU), Denmark is obligated to comply with accounting, auditing, and financial reporting requirements outlined in EU Regulations and Directives, which are transposed into danish laws and regulations. Denmark has fully harmonized its legal framework with the EU acquis communitaire, specifically in relation to accounting and auditing standards.

It is crucial for businesses operating in Denmark to stay informed about any updates or amendments to existing accounting and tax regulations. Regularly checking for changes in VAT rates, reporting requirements, or any modifications in the legal framework is essential to ensure ongoing compliance.

Businesses should be aware of the various incentives and support programs offered by the Danish government to encourage entrepreneurship and economic growth. Understanding eligibility criteria and application procedures for grants, subsidies, or tax credits can be advantageous for businesses seeking financial assistance or looking to optimize their tax positions.

Reporting obligations

Reporting is an essential part of accounting in Denmark and is based on the danish Financial Reporting Act 2001, which divides Danish companies according to their:

• economic and legal form;
• size;
• annual net turnover and assets;
• the number of full-time employees.

Based on the above criteria, companies are divided into the following classes:

CLASS A:

• Companies owned by private individuals, with a turnover of up to CZK 14 million and assets of up to CZK 7 million, with up to 10 employees;
• usually without the need to prepare financial statements (except for reports for tax settlements). However, if there is a reporting provision in the company’s articles of association, a report must be prepared containing:
  • annual balance sheet
  • profit and loss account
  • management board statement
  • supplementary information

CLASS B:

Limited liability companies (such as Danish Ltd) and limited partnerships, as well as companies and foundations:

• with a turnover of up to CZK 89 million and assets of up to CZK 44 million, and up to 50 employees;
• with a turnover of up to CZK 5.4 million and assets of up to CZK 2.7 million, with up to 10 employees;
• The report must include:
  • annual balance sheet;
  • profit and loss account;
  • statement of the management board, including changes in capital;
  • supplementary information.

All Danish companies whose securities are traded on a regulated market are required to apply standards un accordance with the danish directives issued by IFRS and DASC.

CLASS C:

all companies (except joint stock companies) not belonging to Classes A-B:

• with a turnover of up to 313 million and assets of up to DKK 156 million, with up to 250 employees;
• with a turnover of more than 313 million and assets of more than 156 million kronor, with more than 250 employees;
• The report must include:
  • annual balance sheet;
  • profit and loss account;
  • statement of management board, including changes in capital;
  • cash flow statement;
  • supplementary information.

CLASS D:

• all public limited companies and listed companies;
• The report shall include:
  • annual balance sheet;
  • profit and loss account;
  • a management declaration including changes in capital;
  • cash flow statement;
  • supplementary information.

The financial reporting obligations for Danish companies are outlined in European Union regulations and directives. These regulations and directives are then incorporated into Danish law, exemplified by the transposition of the EU Accounting Directive 2015 into the Danish Financial Reporting Act. Companies are obligated to produce reports that encompass a description of management activities, a profit and loss account, a cash flow statement, a statement of changes in equity, a balance sheet, and supplementary information. Given the potential intricacy and detail required, it may be prudent to delegate this task to a proficient accounting firm, ensuring that clients’ affairs are handled with professional expertise.

To facilitate compliance with reporting obligations, companies in Denmark often engage professional accounting firms with expertise in navigating the intricacies of the financial reporting landscape. These firms play a crucial role in ensuring that clients’ financial statements not only meet the statutory requirements outlined in the Danish Financial Reporting Act 2001 but also adhere to the standards set by the European Union.

ONE-PERSON COMPANY ENKELTMANDSVIRKSOMHED

Establishing a sole proprietorship in Denmark is relatively easy and involves fewer legal requirements. These businesses fall under Class A, which makes them simpler to manage compared to other types of companies. Unlike other businesses, the sole proprietorship is not obligated to provide annual financial statements. Instead, the proprietor only needs to complete an annual return and report to the SKAT Tax Office. Moreover, no share capital is needed, and the start-up cost is relatively low, which is around DKK 10,000.

Before starting an Enkeltmandsvirksomhed, a business plan or Forretningsplan is required to detail the entrepreneur’s vision, planned costs, and how to run the business in Denmark. Afterward, the company must be registered with the Danish Enterprise Authority (Erhvervsstyrelsen). It is necessary to have a CPR (identification number) to submit the application electronically.

Sole traders in Denmark who pay taxes and contributions can enjoy health and pension benefits similar to employees. They must submit their VAT and income tax returns every six months or quarterly through LetLøn, an online system managed by the Danish Tax Authority. Furthermore, they must pay advance income tax twice a year, which is due on March 20th and November 20th.

Operating a sole proprietorship in Enkeltmandsvirksomhed comes with a significant responsibility since the entrepreneur is personally liable for the business with their assets. In terms of taxation, there are three methods to choose from:

1. Taking advantage of tax deductions for loan interest expenses or depositing profits into a savings account in a bank, in accordance with the Virksomhedsordning Act.
2. Treating all profits as personal income.
3. Dividing the company’s profits into personal income and capital income, in line with the Kapitalafkastordning Act.

In general, accounting for a one-person company is straightforward, as income tax is calculated based on a single tax return, and the business owner is not required to register as a VAT payer if revenues do not exceed DKK 50,000.

COMPANIES

Accounting for companies is much more complicated in Denmark than for sole proprietorships.

Danish company income tax is settled through CIT – 22%, from danish entities. Additionally, after exceeding 20 thousand kroner, the company becomes a VAT payer – the tax is then 25%.

Non-listed companies in Denmark are obligated to adhere to the Danish Financial Statements Act. Danish accounting adheres to the European Union’s 2002 regulation regarding the application of international accounting standards. Consistent with EU regulations as transposed into the Danish Financial Statements Act of 2002 (as amended in 2014), these companies have the option to adopt either the International Financial Reporting Standards (IFRS) or the Danish Accounting Standards developed by the members of the FSR – danske revisorer Danish Accounting Standards Committee (DASC). IFRS (International Financial Reporting Standards) is a set of danish accounting standards recognized by the European Union which sets out the principles for reporting. International Financial Reporting Standards (IFRS) encompass standards, interpretations, and the framework adopted by the International Accounting Standards Board (IASB). According to reports from the FSR, the translated into danish standards have identical effective dates in Denmark as those promulgated by the IAASB.

CONTOPLAN

Within Denmark, every business activity is obligated to be recorded, facilitated by the designated chart of accounts. An accounting chart of accounts is a system that facilitates accounting – it enables a company to correctly qualify its costs and revenues and to keep clear economic records. The Accounting Act of 1998 furnishes guidance on the appropriate structuring of a company’s accounts and the proper compilation of business records and documentation.

Accounting accounts in Denmark are divided into groups. These include:

Nettoomsætning – sales of goods and services, including but not limited to:
1010 – sales with VAT
1050 – export of goods to the EU

Ændring i lagre af færdigvarer og varer under fremstilling – stock changes, including but not limited to:
1410 – stock adjustments

Omkostninger til råvarer og hjælpematerialer – cost of materials and raw materials, including but not limited to:
1610 – Purchase of goods with VAT

Andre eksterne omkostninger – other external costs, including but not limited to:
1710 – cost of shipping goods
1730 – cost of advertising
1810 – representation costs

Lokaleomkostninger – costs related to premises, including but not limited to:
1910 – rent of premises with VAT
2010 – heating
2130 – insurance

Administrationsomkostninger – administrative costs, including, among others:
2250 – subcontractors
2410 – quotas
2490 – telephone, internet
2530 – office supplies
2570 – travel expenses
2850 – other costs

Personaleomkostninger – costs related to the employment of staff, including but not limited to:
2910 – salaries
2930 – retirement benefits

Af- og nedskrivninger af materielle og immaterielle anlægsaktiver –
depreciation of fixed assets, of which, inter alia
3180 – depreciation of goodwill
3220 – depreciation of production machinery and equipment

Andre driftsomkostninger – other operating costs, including, inter alia:
3310 – loss on sale of intangible fixed assets
3330 – loss on sale of tangible fixed assets

Andre finansielle indtægter – other financial income, including, among others:
3440 – interest from the bank

Øvrige finansielle omkostninger – other expenses, including but not limited to:
3610 – exchange rate adjustment
3670 – interest to bank or lender

Skat af årets resultat – income tax
3470 – tax amount

AUDITS

Audits, i.e. inspections of financial statements prepared by companies, are an integral part of Danish company reporting. The auditor, i.e. the person or audit firms who conduct the inspection, may be an independent external body – either public or authorized.

This issue is mandatory for Class C and D companies. For Class A companies and some Class B companies, audits are voluntary and depend on the amount of turnover during the year. In addition, the owner of a class B company has the possibility to choose the type of audit most favourable to the company – audit, professional accounting assistance or report verification.

Plans and any changes to the company’s accounting system should be based on the internal audit. According to the Act on the Auditor General, the person conducting the internal audit should be independent of the management, but should be provided with access to relevant documentation.

Under the current legal framework in Denmark, danish statutory auditors are subject to state-level regulation. The primary legislation governing the auditing profession in Denmark is The Danish Act on Approved Auditors and Audit Firms, commonly known as the Audit Act. The most recent consolidated Act on Approved Auditors and Audit Firms, identified as Consolidated Act No. 1287, was issued on November 20, 2018. From 2010 onwards, Danish auditing standards have essentially conformed to the International Standards on Auditing (ISA) disseminated by the IAASB, translated by the FSR.

In addition to state regulation, the FSR governs its members, undertaking responsibilities such as:
– prescribing accounting and auditing standards;
– formulating and enforcing ethical requirements;
– collaborating with the Danish Business Authority (DBA) for the investigation and discipline of FSR members;
– working in partnership with the Danish Business Agency and the Danish Financial Supervisory Authority to establish initial and ongoing professional development requirements.

In accordance with Act No. 617 of June 12, 2013, the State Authorized Public Accountant (SPA) designation is exclusively designated for danish auditors in Denmark. The responsibility for establishing and administering Initial Professional Development (IPD) for SPAs in Denmark is shared among the Danish Business Authority (DBA), the Danish Financial Supervisory Authority (DSFA), and universities. The responsibility for public oversight of financial reporting and auditing is entrusted to two key governmental institutions in Denmark authorized by the Danish Parliament: the Danish Business Authority (DBA) and the Danish Financial Supervisory Authority (DFSA). The Danish Business Authority is the entity responsible for overseeing all changes that occur in company law and accounting law in Denmark.

COMPANY COSTS

Costs, together with accounts, assets and danish balance sheets, are important elements of the accounting of a company operated in Denmark.

Assets are divided in the balance sheet according to the principle of increasing liquidity – from the least liquid assets (intangible assets) to those with the greatest liquidity (cash). Liabilities are in turn divided into external capital and equity.

Structure of the balance sheet:

FIXED ASSETS:

• intangible:
  • goodwill;
  • licences, permits, concessions, trademarks;
  • completed and commenced research and development projects;
  • advances for intangible assets.

• tangible:
  • real estate;
  • equipment, machinery, plant, and advances;

• financial:
  • shares, stocks;
  • receivables – among others from owners, management and related parties;
  • investments and shares – among others with related parties.

CURRENT ASSETS

• reserves:
  • finished goods and goods in production;
  • materials and raw materials;
  • advances on products.

• payables:
  • receivables from owners, management and related parties;
  • trade receivables;
  • contracts related to work in progress;
  • settlements.

• cash:
  • capital (contributed, reserve, premium account);
  • provisions (for income tax, pension provision);
  • liabilities (current and non-current, e.g. trade, related parties, credit, mortgage debt, income tax, advances from contractors, and debt resulting from bond issues);
  • accruals and deferred income;
  • liabilities.

• investments:
  • shares;
  • investments, including in related parties.

VAT in Denmark

VAT registration process in Denmark

Prior to commencing business activities, it is imperative for your company to initiate the process of VAT registration with the Danish tax authorities. Failure to submit the registration application on time may result in financial penalties. Should your company seek VAT registration in Denmark, it is crucial to engage with the Danish tax authorities directly. There is no necessity to contact the tax authorities in your home country.

Specifically, your company will be required to furnish the following documents:

1. Completed VAT registration form(s) in the language of the country.
2. A copy of the articles of association.
3. An extract from the trade register.
4. A certificate of VAT liability.
5. Power of attorney (if utilizing a fiscal agent).
6. Evidence of activity within the country, such as a contract or order form.

The Danish tax authorities may request the translation of some of these documents into Danish.

Assuming your documentation is comprehensive, the process of obtaining a VAT number generally takes one month to secure the VAT number. Non-European companies are unable to independently register for VAT in Denmark and must engage a VAT representative. This representative, a local company, assumes responsibility for representing your interests to the local VAT authorities. They are accountable for fulfilling all your VAT obligations, even those of which they may not have been aware. Consequently, they may request a deposit, such as a bank guarantee, before accepting the representation assignment.

European companies are not obligated to appoint a VAT representative. However, for smoother interactions with local tax authorities, they may choose to designate a proxy (agent) to handle tax formalities on their behalf. In such cases, issuing a bank guarantee is unnecessary, as the company retains sole responsibility for settling its VAT obligations. It is imperative for your company to maintain detailed ledgers that facilitate the application and scrutiny of VAT by the Danish tax authorities.

Your company must submit periodic VAT returns based on the following criteria:

1. Monthly basis:
– If your business’s annual revenue subject to VAT exceeds DKK 50 million (€6,700,000).
– If you have voluntarily opted for monthly settlement.
2. Quarterly basis:
– If Danish authorities assess your business’s annual revenue subject to VAT to be DKK 5-50 million (€670,000 – €6,700,000).
– If your business is new.
– If you have chosen quarterly settlement voluntarily.
– If your business is new, quarterly VAT declarations are required for at least 18 months before Danish VAT authorities (SKAT) assess your revenue, and there may be subsequent changes, necessitating a switch to semi-annual VAT declarations.
3. Half-yearly basis:
– If your business’s annual revenue subject to VAT is less than DKK 5 million (€670,000).
– If your VAT return has been filed and paid on time.

The electronic submission deadlines are as follows:
– For quarterly or half-yearly submissions: By the 1st day of the 3rd month following the respective quarter or half-year.
– For monthly submissions: By the 25th day of the month following the reporting month.

Recovering VAT in Denmark involves distinct procedures based on your company’s establishment and VAT identification. Here are the methods depending on your situation:

1. If your company has a VAT number in Denmark:
– Submit a refund application in the prescribed form and within the specified timeframe according to local regulations.
– VAT credits are not automatically carried forward to the next period.
– Refunds are typically processed promptly, usually within 21 days after the VAT declaration.
2. If your company is established in a european country without a VAT number in Denmark:
– Apply for a VAT refund electronically from your country of residence.
– Adhere to the form and time limits stipulated by Directive 2008/9.
3. If your company is established outside Europe without a VAT number in Denmark:
– Appoint a tax representative to submit the refund application on your behalf.
– Ensure that the application is in the required form and submitted within the time limits specified by the 13th Directive.

It’s crucial to follow the specific procedures outlined for each scenario to facilitate the VAT recovery process effectively.

Danish VAT can generally be recovered on expenses related to purchases, imports, or intra-Community acquisitions of goods and services, provided the following conditions are met:
I. The expenses are incurred for taxable activities.
II. Appropriate documentation supporting the VAT claim is available.

However, there are certain expenses on which Danish VAT is either not recoverable or only partially recoverable. These include:
– Restaurant expenses – 25% of the VAT on restaurant expenses is recoverable.
– Passenger cars – The VAT on passenger cars is not recoverable.
– Entertainment, representation, and presents – VAT on expenses related to entertainment, representation, and presents may not be recoverable.
– Food for the owner and employees – VAT on food for the owner and employees may not be recoverable.

It’s important to note that Danish VAT allows for the full deduction of input VAT on hotel accommodation costs, provided that these expenses are directly and strictly related to business taxable activities.

Companies should carefully review their expenses and ensure that they comply with Danish VAT regulations to determine the recoverability of VAT on specific items. Keeping accurate and complete documentation is essential for successful VAT recovery.

Information and documents

Information on how to register and operate a Danish company and its accounting can be found on the Erhvervsstyrelsen (Danish Business Activity Authority) website. The website also offers access to many documents that are important to an entrepreneur – these include:

årsopgørelsen – the annual return, which is a document containing the tax calculation for the previous year, sent on 15 March by the Tax Office. The information in the document can be amended by the taxpayer by 1 May at the latest – electronically via TastSelv. Entrepreneurs receive the final calculation of årsopgørelsen only after they have completed the oplysningsskema received from the Tax Office;

oplysningsskema – a form received from the authorities by, among others, entrepreneurs. The document must be completed electronically by 1 September at the latest, and årsopgørelsen is prepared based on it;

oplysningsseddel – a summary of the employee’s wages that must be given to the person concerned when the employment ends.

When looking for information on companies registered in Denmark, it is worth visiting virk’s website. There, you will find information such as:

• company name and address – if you do not have your own office in Denmark and for some reason do not want to have a physical location, you can use a virtual office service;
• contact information;
• the organization number (CVR);
• legal form;
• company structure, related parties;
• date of commencement and possible termination of activities;
• information on owners, management, and shareholders;
• number of persons employed;
• information about reporting, balance sheet, accounting and credit facilities, if any.

Accounting standards applicable in Denmark

As a member of the European Union (EU), Denmark adheres to the accounting, auditing, and financial reporting requirements outlined in EU Regulations and Directives, which are incorporated into national laws and regulations. Denmark has harmonized its legal framework with the EU acquis communitaire concerning accounting and auditing.

The Danish Parliament has empowered two key governmental bodies to supervise financial reporting and auditing: the Danish Business Authority (DBA) and the Danish Financial Supervisory Authority (DFSA). These entities also function as the designated standard setters for the entities under their oversight.

Accounting framework

In accordance with EU stipulations, as transcribed in the Danish Financial Statements Act of 2002 (amended in 2014), publicly listed companies in Denmark must apply EU-endorsed IFRS in their consolidated financial statements and in separate financial statements for listed non-group companies not preparing consolidated statements. Since 2009, the obligation for listed companies to use IFRS in their separate financial statements has been eliminated. Other companies have the option to apply IFRS.

Non-listed companies must adhere to the Danish Financial Statements Act. They can choose between applying IFRS or the Danish Accounting Standards developed by the Danish Accounting Standards Committee (DASC), affiliated with the FSR – danske revisorer. Danish accounting standards, whether issued by the DASC or IFRS, may be voluntarily applied to enhance transparency and meet user information requirements. Despite being based on IFRS, Danish accounting standards deviate from IFRS in certain aspects.

Under the Danish Financial Business Act, complemented by various executive orders and provisions in other statutes, the DFSA oversees the financial reporting of financial institutions in Denmark. Non-listed financial institutions are obligated by the DFSA to follow the standards outlined in the Danish Financial Statements Act.

Denmark has not adopted IFRS for small and medium-sized entities (SMEs). In 2015, the Danish Parliament granted the DBA the authority to issue rules allowing deviations from the Danish Financial Statements Act to make IFRS for SMEs applicable to Danish companies if necessary. As of the assessment date, no such rules have been issued.

Professional accountancy organizations

FSR – danske revisorer was established in 1912 as a voluntary membership organization for professionals in the field of accountancy.

In 2011, a significant development occurred as three audit institutes—FSR (chartered accountants), the FRR (Danish Institute of Certified Public Accountants), and the REVIFORA (association for younger accountants or trainees)—merged into a unified association under the name FSR. Although auditors in Denmark are not mandated to be members of FSR, the organization asserts that a majority of State Authorized Public Accountants in public practice are affiliated with FSR.

The responsibilities of FSR encompass several key areas: (i) prescribing accounting and auditing standards; (ii) establishing and enforcing ethical requirements; (iii) collaborating with the Danish Business Authority (DBA) in the investigation and discipline of FSR members; and (iv) working in collaboration with the Danish Business Agency and the Danish Financial Supervisory Authority to define initial and ongoing professional development requirements.

Notably, FSR is an active member of the International Federation of Accountants (IFAC), demonstrating its international engagement. Additionally, FSR holds membership in Accountancy Europe and the Nordic Federation of Accountants, further contributing to its participation in regional and continental professional networks.

Management of the accounting profession

The establishment and administration of Initial Professional Development (IPD) for Statutory Public Accountants (SPAs) in Denmark are shared responsibilities among the Danish Business Authority (DBA), the Danish Financial Supervisory Authority (DSFA), and universities. Prospective candidates must possess a master’s degree, undergo three years of practical training, and successfully complete a final examination of professional competence conducted by the DBA and FSR. Since 2006, members of FSR – danske revisorer, the jurisdiction’s professional accountancy organization, have been mandated to fulfill a minimum of 120 hours of Continuing Professional Development (CPD) over a three-year cycle, with compliance subject to verification.

The Audit Act grants the DBA authority to (i) approve, register, and license auditors and audit firms; (ii) safeguard the SPA designation; (iii) establish standards and regulations covering education, ethics, auditing, and reporting; (iv) conduct quality assurance reviews; (v) perform investigation and disciplinary actions; and (vi) collaborate and share information with authorities in other countries concerning audit supervision.

In addition to state regulation, the FSR governs its members, with responsibilities that encompass (i) prescribing accounting and auditing standards; (ii) formulating and enforcing ethical requirements; (iii) cooperating with the DBA in the investigation and discipline of FSR members; and (iv) collaborating with the Danish Business Agency and the Danish Financial Supervisory Authority in defining initial and ongoing professional development requirements.

The Danish Financial Supervisory Authority, as the financial sector regulator, holds the authority to set additional educational requirements for auditors. As outlined in Executive Order No. 1406 of December 11, 2013, on CPD for SPAs, auditors engaged in statutory audits for financial institutions are obliged to accumulate a minimum of 180 CPD hours within a three-year period, including a mandatory 60 hours specifically focused on accounting and auditing services within such institutions.

Implementation of international norms

1. Code of Ethics for Professional Accountants

The Danish Act on Approved Auditors and Audit Firms, specifically Consolidated Act No. 1287 of November 20, 2018, empowers the Danish Business Authority (DBA) to establish ethical requirements for State Authorized Public Accountants. In practice, the ethical standards issued by FSR – danske revisorer are implemented.

According to FSR, the International Ethics Standards Board for Accountants (IESBA) Code of Ethics has been in effect in Denmark since the year 2000. FSR maintains an ongoing process to incorporate amendments to the Code, and it has adopted and translated the 2018 version of the International Code of Ethics for application by its members. To align with Danish legal requirements, the Code of Ethics includes additional provisions beyond those outlined in the international standards. This ensures that ethical practices among professional accountants in Denmark not only adhere to global standards but also comply with specific local regulations and considerations.

2. Quality assurance

Quality Assurance (QA) in the context of auditing in Denmark is governed by the Danish Act on Approved Auditors and Audit Firms, specifically Consolidated Act No. 1287 of November 20, 2018. Under this legislation, the Danish Business Authority (DBA), which operates under the Ministry of Industry, Business and Financial Affairs and is overseen by the Danish Parliament, is entrusted with the responsibility of supervising the QA review system.

The DBA conducts reviews of auditors and audit firms that perform audits for public interest entities (PIEs) on a three-year review cycle. For auditors and audit firms working with non-PIEs, reviews are carried out at least every six years. Following the QA reviews, the DBA provides recommendations for appropriate follow-up actions to the firms based on their findings. If necessary, the DBA has the authority to impose relevant sanctions.

FSR – danske revisorer asserts that the QA review system managed by the DBA meets the requirements of SMO 1 (revised 2012). This compliance with international standards underscores the commitment to maintaining high-quality audit practices in Denmark, ensuring the integrity and reliability of financial reporting within the jurisdiction.

3. International Financial Reporting Standards

In Denmark, the designated accounting standard setters are the Danish Business Authority (DBA) and the Danish Financial Supervisory Authority (DFSA).

Listed companies in Denmark are required to follow EU-endorsed International Financial Reporting Standards (IFRS) in their consolidated financial statements and in separate financial statements for listed non-group companies that do not prepare consolidated statements. This requirement is in accordance with EU regulations transposed into the Danish Financial Statements Act of 2002.

Non-listed companies must adhere to the Danish Financial Statements Act, and they have the option to choose between applying IFRS or the Danish Accounting Standards developed by the Danish Accounting Standards Committee (DASC) under FSR – danske revisorer. Both Danish accounting standards and IFRS may be voluntarily applied to provide transparency and meet user information needs. Despite being based on IFRS, Danish Accounting Standards have variations from IFRS in certain aspects.

The Danish Financial Supervisory Authority (DFSA), under the Danish Financial Business Act and supported by executive orders and provisions in other acts, oversees financial reporting for financial institutions in Denmark. Non-listed financial institutions are required by the DFSA to apply standards defined in the Danish Financial Statements Act, alongside DFSA directives. Notably, the definitions of elements, recognition criteria, etc., outlined in the Danish Financial Statements Act and in the DFSA’s executive orders align with the IFRS Framework and standards.

Denmark has not adopted IFRS for Small and Medium-sized Entities (SMEs). In 2015, the Danish Parliament granted the DBA authorization to issue rules allowing deviations from the Danish Financial Statements Act if necessary to make IFRS for SMEs applicable to Danish companies. However, as of the current information, no such rules have been issued.

4. International public sector accounting standards

As of the information available, the Danish Ministry of Finance, responsible for the adoption of public sector accounting standards, has not chosen to adopt International Public Sector Accounting Standards (IPSAS) in Denmark. Additionally, there is no specified timeline for the adoption of IPSAS in the country. Public sector bodies in Denmark currently prepare their financial statements on an accrual basis, as indicated by IFAC and CIPFA in 2018.

Despite the lack of adoption, the Central Government Accounts Council, consisting of representatives from various ministries, the National Audit Office, and FSR – danske revisorer, monitors the development of IPSAS and observes how these standards are utilized by other European Union member countries. It’s noteworthy that IPSAS have not been translated into Danish.

This situation implies that while Denmark has not formally adopted IPSAS, there is an ongoing awareness and monitoring of international developments in public sector accounting standards within the country. The decision not to adopt IPSAS may be influenced by various factors, including the alignment of existing practices with other international standards and the specific requirements of the Danish public sector.

IMPORTS AND EXPORTS

Denmark’s international trade is mainly based on cooperation with European Union countries, primarily Germany, the United Kingdom and Sweden. Denmark’s exports include foodstuffs, chemicals, and livestock. The country’s imports focus on modified products, machinery, and equipment of various kinds, as well as chemicals.

International trade relations are regulated in Denmark by Eksportrådet, the Danish Trade Council. In addition, the terms of cooperation with EU countries are set by the Europe Agreement – the foreign trade zone guarantees low preferential tariffs (mostly 0%, except for agricultural and processed food products). The low rate is available upon presentation to a Danish customs officer document the name EUR 1, i.e. a certificate of origin for the goods. Customs duty is calculated on the amount on the invoice, including transport and insurance of the transported goods.

VAT (Danish Moms) is 25% for most services, as well as industrial and agricultural goods. Excise duty rates differ for the following products:

• tobacco and alcoholic goods;
• coffee, tea;
• chocolate products;
• ice cream;
• vehicles;
• fuel;
• video cassettes and discs;
• light bulbs;
• plastic packaging.

Companies planning to import goods from abroad must obtain the required licences and permits and meet the relevant standards:

1. import of foodstuffs:
   • licences from Fødevarestyrelsen (the Danish Veterinary and Food Administration);
   • each product must comply with the standards governing the use of preservatives in food;
   • the goods must be labelled with the ingredients described in Danish.
2. imports of cleaning products and cosmetics:
   • the authority that regulates imports is Miljøministeriet (Denmark’s Ministry of the Environment);
   • once a year, the Ministry must receive a summary of activities from the enterprise.
3. import of products or chemical substances harmful to health:
   • the authority to which the entrepreneur is accountable is Miljøministeriet;
   • check that the substances being transported are permitted on the Danish market – in the case of ingredients on the LOUS (List of Undesirable Substances), the Miljøministeriet must be notified of the intention to import;
   • the substance to be placed on the market must first be assigned to the correct category;
   • the goods must be labelled with an ingredient label in Danish, as well as an appropriate warning label regarding hazardous substances.

Certain imported goods should receive the CE (Conformité Européenne) mark, confirming that they meet the relevant guidelines of the European Union directives. These include:

• machinery and equipment, including:
  • cranes;
  • gas machines;
  • mechanical scales;
  • low voltage electrical equipment;
  • air tanks;
  • in vitro diagnostic apparatus;
  • active implantable medical devices;

• explosives (for private individuals);
• protective systems for places at risk from explosions;
• electromagnetic compatibility equipment;
• radio and telecommunications equipment;
• linear railway installations;
• efficiency of cooling appliances and boilers;
• construction materials;
• protective equipment (for workers);
• yachts, boats;
• toys.

EMPLOYER IN DENMARK

The most important documents that define the rights and obligations of the employee and the employer are Ansættelsesbevisloven and Arbejdsmiljøloven (labour law, occupational health and safety). You should also check the website of Arbejdstilsynet (the Danish Labour Inspection Authority). Through trade unions, an employee may also be protected by a collective agreement (an agreement between employees and employers).

The obligations of a Danish employer under the above documents include the following:

• informing employees of the conditions and specifics of the work and providing health and safety training (at least once a year);
• providing a safe workplace and appropriate protective equipment, as well as measures to prevent injuries;
• insuring workers against occupational diseases and accidents;
• providing fair wages;
• maintaining a good working environment and preventing discrimination.

Danish employers are obligated to also comply with Danish labor law and health and safety regulations, as outlined on the website of the Danish Labour Inspection Authority (UIP).
Any entrepreneur starting a company in Denmark should read the Employment Document Act before recruiting employees.

Employers sending employees on business trips from EU countries to Denmark must register with the RUT and with Erhvervsstyrelsen in order, to obtain an organization number, CVR. It is also necessary to comply with the rules set out in documents such as:

• the 1996 Directive on posting abroad issued by the European Union;
• The Posting of Workers Act 1999, issued by the Kingdom of Denmark.

Changes in Danish accounting regulations

In an effort to embrace digital transformation, the Danish government has recently enacted a new Bookkeeping Act, indicating a transition toward modernized financial practices for businesses. Although the Danish Business Authority is currently refining the specifics, we have compiled essential insights to assist businesses in comprehending the implications of this legislation.

As part of the ongoing transition, the Danish Business Authority is presently assessing providers of bookkeeping systems to ensure adherence to forthcoming regulations. Microsoft has taken a proactive initiative by seeking approval for its Business Central Software as a Service (SaaS) solution. Having dedicated substantial time and resources to this endeavor, Microsoft is striving to satisfy the rigorous criteria established by the government. The publication of the list of approved bookkeeping systems is anticipated in January 2024.

It is important for businesses to be aware that the new measures will not come into effect until the financial year commencing after 1 July 2024. For companies operating on a calendar year basis, this implies that full compliance is anticipated by January 2025.

The primary emphasis of the requirements set by the Danish Business Authority is on the capability to operate digitally. This means that all transactions must be conducted digitally and be traceable, with all pertinent documents stored within the financial system. This encompasses ledger journals, purchase journals, and other relevant documentation. Furthermore, businesses are required to have the capability to send and receive invoices and credit notes in OIOUBL and PEPPOL formats.

Opting for Business Central on Microsoft SaaS positions you advantageously. The latest cloud-based versions seamlessly integrate OIOUBL and PEPPOL capabilities directly into the system. Achieving compliance is straightforward with a simple agreement with a VANS provider, and we are prepared to assist you in this process if needed. Additionally, in Business Central, you have the flexibility to include image attachments with transactions. We also provide a solution that incorporates POS actions for managing expenses and returns directly from the POS, utilizing a scanner or camera. The captured images are electronically stored with the transaction, accessible at any time through Business Central.

For those who have not yet migrated to the Microsoft Business Central SaaS solution, previous versions of Business Central and Navision still offer options for managing digital documents. However, it is essential to recognize that investments made in these solutions may require duplication when eventually transitioning to Business Central SaaS. Furthermore, it is crucial to highlight that postponing migration to the Microsoft Business Central SaaS solution can result in significantly higher costs for the business.

Businesses are encouraged to welcome the changes and take proactive steps to be well-prepared for the digital era. Microsoft, with its dedication to compliance, guarantees users that the SaaS version will consistently support both current and future changes mandated by the Danish Business Authority. Businesses contemplating the migration can leverage the support and solutions offered by Microsoft.

As the Danish business landscape undergoes digital transformation, staying ahead of the curve is crucial. The introduction of the new Bookkeeping Act marks a substantial stride toward a digital future, and businesses can flourish by embracing solutions that not only fulfill current requirements but also strategically position them for forthcoming changes.

FAQ

1. Can I file my tax return for working in Denmark online?

   Yes, you can settle with the Danish authorities by logging on to https://www.skat.dk/ using TastSelv.

2. What is personfradrag?

   It is a tax-free allowance. It can be applied by danish residents whose major part of income during tax year comes from Denmark.

3. What tax reliefs can I count on when settling my tax with Danish tax office?

   The following tax reliefs are available in Denmark:

   • personfradrag – tax-free amount;
   • kørselsfradrag – deduction of commuting expenses;
   • rentefradrag – deduction of interest on loan;
   • beskæftigelsesfradrag – deduction for employment;
   • børnedagplejere – child care allowance;
   • kost og logi – deduction for board and lodging.
4. How do I know if I have tax to pay?

   You will find the information you need on the form sent to you by Årsopgørelsen:

   • til betaling – when you have to pay extra to the Tax and Customs Administration;
   • til udbetaling – in a situation where the Authority will return the overpaid tax.
5. According to the Årsopgørelsen I will receive a tax refund for the last year. When can I expect to receive the money?

   The amount of time you have to wait for your tax refund from the Danish Tax Agency depends on when you submitted your tax return. The money is usually transferred to your account automatically after 9th April.

6. What is Årsopgørelsen?

   Årsopgørelsen is a tax decision you receive from the Tax Office for the previous year that contains a detailed calculation.

7. How do I get a TastSelv code?

   You can order a code on the website of the Danish Tax Agency. For this, you will need your CPR number.

8. How many days of holiday danish worker is entitled to per year?

   According to the new holiday law, danish workers entitled to 25 days holiday per year. Holiday days are accrued from the beginning of September to the end of August of the following calendar year – 2.08 days per month worked.

9. What is Feriepenge?

   The Feriepenge is a 12.5% gross holiday pay supplement for all employees in Denmark. The employer transfers the money to a special Feriekonto.

   Due to the introduction of the new holiday law in 2020, it is not possible for the employee to pay the Feriepenge accumulated from 1 September 2019 to 31 August 2020. – This money is „frozen”, or more precisely transferred to the employee’s fund.

10. What is Feriekonto?

    This is the Danish system governing the payment of Feriepenge. The employer is obliged to transfer the equivalent of 12.5% of the employee’s gross pay to a special account. The money is transferred from Feriekonto to the employee’s personal NemKonto once the employee has registered their holiday at www.borger.dk – at the earliest, one month before the first day of the planned holiday. If the employee reports his/her holiday electronically less than 4 weeks before it starts, the money will appear in NemKonto within 5 working days.

11. What is NemKonto?

    NemKonto is the bank account of an employee or entrepreneur, which is used for e.g. salary, Feriepenge or tax refunds.

12. What is A-kasse?

    By A-kasse we mean voluntary unemployment insurance. To use the fund, you must register at www.min-a-kasse.dk and pay contributions.

13. What is ATP?

    It is the Danish occupational scheme, which is part of the second pension pillar, to which every Danish citizen over the age of 16 belongs.

14. What is folkepension?

    Folkepension is the state pension fund in Denmark. Every Danish citizen over 65 years of age is entitled to benefits.

15. What is a pension?

    It is a pension based on individual pension accounts, such as PFA Pension, Industriens Pension, Danica Pension or PensionDanmark.

16. What is a Sundhedskort?

    The Sundhedskort (sygesikringsbevis) is a yellow health card that you need if you intend to stay in Denmark for at least one quarter. It gives you free access to medical care in Denmark (but does not cover dental care). You will receive the card at the same time as your CPR number.

17. How long do I have to keep documents related to my employees?

    You should keep such documents for 5 years.

18. Are there International Public Sector Accounting Standards (IPSAS) in Denmark?
    As of now, the Danish Ministry of Finance, tasked with the adoption of public sector accounting standards, has not implemented International Public Sector Accounting Standards (IPSAS) in Denmark. Furthermore, there is no established timeline for the adoption of IPSAS at present.
19. What is the difference between pension and folkepension?
    In Denmark, pension is Danish private pension accumulated in private pension funds, whereas folkepension represents the state pension provided to all Danish citizens aged 65 and above.