New Danish Bookkeeping Act

The new bookkeeping law came into effect on 1st July 2022 and has therefore already been in place for a couple of years. Before the summer, businesses primarily had to focus on the procedural descriptions, but on 1st July 2024, the requirement for digital bookkeeping also came into force for the first group of companies. 

In this blog post, you can read more about the legislation and the requirements it has introduced. We also take a closer look at the workflows that need to be changed in businesses. Finally, we address the changes in the Annual Accounts Act, which likewise impact how annual accounts in companies should be prepared going forward. 

What is the new bookkeeping act?

In 2021, a broad political majority entered into a political agreement on a reform package for the Danish economy. The purpose of the reform package is to strengthen efforts to combat fraud, while at the same time making it easier for companies to comply with their bookkeeping duty. 

Generally, the new reform package includes two initiatives of which companies need to be especially aware: 

• A new Danish Bookkeeping Act 
• An amended Danish Financial Statements Act incorporating changes to the auditing requirement.

When does the new bookkeeping law come into effect? 

The new bookkeeping law came into effect on 1st July 2022, but the key provisions regarding the use of digital bookkeeping systems and the related requirements will be introduced gradually over several years. This phased approach allows enough time to establish the precise requirements for bookkeeping systems and gives providers the opportunity to develop the necessary new features. 

From 1st July 2024, digital bookkeeping systems will become mandatory for companies with financial years starting from 1st July, in accounting classes B, C, and D. For companies in accounting class A, the requirement will take effect no earlier than 1st January 2026. This timeline ensures that all businesses have sufficient time to comply with the new regulations before they come into full effect. Since the law is being implemented in stages, the timeline for when companies must comply with the new requirements could still change. 

It is important to note, however, that from 1st July 2024, only companies using approved standard bookkeeping systems must comply with these requirements. If your company handles its bookkeeping manually or uses another program that has not been pre-approved by the Danish Business Authority, you will not need to comply with the requirements until 1st January 2025. Additionally, if your company does not use a standard digital bookkeeping system, you are responsible for ensuring compliance with the digital bookkeeping requirements. 

Who does the new bookkeeping law apply to? 

The new bookkeeping law and the requirement for digital bookkeeping apply to all companies, regardless of size, that are obligated to submit an annual report and file it with the Danish Business Authority. 

However, the bookkeeping law also applies to other businesses that are not required to submit an annual report or file with the Danish Business Authority, including sole proprietorships, associations, branches, etc., if the business has had a turnover exceeding DKK 300,000 for two consecutive years. 

Many companies have therefore already taken the step and implemented digital systems for managing accounting materials, which will make the transition easier. However, it is expected that a significant portion of the country’s approximately 300,000 companies will now need to begin digitalising their processes – or ensure that their systems and processes are compliant with the upcoming regulations. 

What changes will the new Danish Bookkeeping Act entail? 

If you do not already manage receipts, vouchers and accounting records digitally, the new Danish Bookkeeping Act will have a significant impact on your everyday work processes. Overall, the most significant changes are as follows: 

• All accounting records must be stored digitally. The storage must comply with the applicable rules of GDPR, and companies are obliged to ensure a backup copy of the records. The frequency with which the backup copy has to be updated depends on the complexity of the business, as well as the number of transactions and their size. However, the legislation stipulates that companies with numerous daily transactions must make a backup copy daily. 
• The definition of accounting records is being expanded to include documentation of factual information given in the management’s report in the company’s annual report. 
• Simplified requirements for the company’s description of its procedure for recording transactions and storing accounting records. 
• The Danish Business Authority has the power to carry out a bookkeeping audit of companies that have not submitted their first annual report and companies that have opted out of auditing. 
• Introduction of a significantly higher fine. 

What has to be stored digitally? 

From 1 July 2024, it will be mandatory to store all accounting records digitally. The following must therefore be stored digitally: 

• Vouchers/receipts 
• Records, among other things, the transaction trail 
• Description of the company’s bookkeeping procedures 
• All information essential to the audit trail 
• Documentation for information given in the notes and management’s report in the annual report, and for estimates and assessments made in connection with the preparation of the company’s annual report 
• Accounts that are required to be prepared in accordance with legislation 
• Any auditor’s records or equivalent reporting. 

Fine of up to DKK 1.5 million for non-compliance 

The new Danish Bookkeeping Act will have stricter rules and larger fines for non-compliance. The Danish Business Authority has the power to demand to see the records and to carry out an inspection of companies that have not submitted their first annual report or have opted out of auditing. If the given company is not able to present the original digital accounting records or make the digital backup copy available to the authorities, there is a higher level of fines. You can therefore be fined up to DKK 1.5 million for non-compliance. 

Amendments to the Danish Financial Statements Act 

As mentioned in the introduction, the new legislative package also provides for amendments to the Danish Financial Statements Act. The biggest changes are the requirements for an auditing requirement, as well as the specific addition of money laundering legislation. 

The changes are relevant for companies that are considered to be in high-risk sectors. 

Requirement for an auditor’s statement  

For companies in 11 high-risk sectors with annual net revenue of more than DKK 5 million in two consecutive years. Companies can choose between an audit report, an extended audit report, a review statement or a statement on assistance with the preparation of the financial statements. The 11 high-risk industries are: 

• Road freight transport 
• Removal services 
• Restaurants 
• Pizzerias, take away outlets, ice cream parlours, etc. 
• Event catering 
• Other catering business 
• Cafes, pubs, nightclubs, etc. 
• Data processing, web hosting and similar services 
• Web portals 
• Wholesale trade of cars, vans and minibuses 
• Retail trade of cars, vans and minibuses.

According to the legal comments, the list of high-risk sectors should be revised every two years based on experience and knowledge of the effect on regulatory compliance in the sectors. 

The other biggest changes are: 

• Auditing requirement for companies with a balance sheet total of more than DKK 50 million in two consecutive years, regardless of net revenue. Here you can choose between an audit report or an extended audit report. 
• The number of employees must be stated, even if there are 0 employees. 
• The deadline for submitting annual reports is extended from five to six months for companies in class B and C. The deadline remains four months for class D. 
• Addition of money laundering legislation in the provision that opting out of auditing is not possible if the decision-maker in the company accepts a fine or, as part of criminal proceedings, is convicted of violation of company legislation, accounting legislation or tax and excise legislation. Furthermore, it is not possible to opt out of auditing if a member of the management team has been entered in the bankruptcy quarantine register within the past two years. 
• Possibility to administratively order an audit if significant errors or deficiencies are found in the company’s bookkeeping. 

The new legislative package is expected to enter into force on 1 July 2022 and to take effect from 1 January 2023. Digital recording and storage of accounting records must be carried out for transactions made for financial years from 1 January 2023 and thereafter. 

Do you need help or advice? 

Having new requirements imposed is rarely desirable. However, the amended legislation may contribute to an acceleration in new practices and work processes that will free up time from manual processes. Once the new work processes are embedded, it is our belief that your working day will be easier, with greater overview, more systematisation and fewer challenges in finding and handling your accounting records. 

Do you need help or assistance with the transition to the new set of rules? You are welcome to contact us on tel. +45 70 232 232 if you would like to talk about how your company can best approach the transition to the new Danish Bookkeeping Act. 

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