Starting a business in Denmark requires more than just a great idea—you also need to understand how to manage your finances in compliance with Danish regulations. Accounting is a fundamental part of running a company, whether you're a sole trader, small enterprise, or growing startup. This article provides a detailed guide to accounting in Denmark, covering key responsibilities, tax obligations, reporting standards, and digital tools available to small business owners. With the right knowledge and systems, you can ensure your accounting is accurate, efficient, and fully compliant with Danish law.
Business Structures and Their Accounting Requirements
In Denmark, the structure of your business affects your accounting obligations. The most common forms include:
- Enkeltmandsvirksomhed (sole proprietorship)
- Anpartsselskab (ApS - private limited company)
- Aktieselskab (A/S - public limited company)
Sole proprietors have the simplest accounting in Denmark duties, but limited liability companies must follow stricter regulations set by the Danish Financial Statements Act (Årsregnskabsloven). The Act defines reporting classes (A to D), with Class A covering small businesses and Class D covering publicly traded companies.
Regardless of the structure, all businesses must maintain transparent and traceable financial records that meet the requirements of the Danish Business Authority (Erhvervsstyrelsen).
Basic Bookkeeping Rules for Danish Businesses
All companies in Denmark are legally required to maintain proper bookkeeping. This involves:
- Recording all income and expenses
- Documenting invoices, receipts, and bank transactions
- Following the double-entry accounting system
- Keeping records for at least five years
Bookkeeping must be accurate, up-to-date, and accessible in case of audit or review by tax authorities. Many entrepreneurs use professional bookkeepers or accounting software to handle this efficiently.
Denmark permits digital bookkeeping, and it's encouraged for its efficiency and security. Scanned or digital copies of receipts and invoices are valid as long as they are stored securely.
Understanding VAT and Tax Reporting in Denmark
One of the most critical aspects of accounting in Denmark is understanding how taxes work. There are three main types of taxes that small businesses need to consider:
- VAT (Moms): The standard VAT rate is 25%. If your revenue exceeds 50,000 DKK annually, you must register for VAT. VAT must be reported and paid to SKAT (Danish Tax Agency) monthly, quarterly, or semi-annually depending on revenue.
- Corporate Income Tax: The corporate tax rate in Denmark is 22%. Companies must submit an annual tax return based on their financial results.
- Personal Income Tax (for sole proprietors): Income is taxed progressively. Accounting must reflect business earnings, which are then reported as part of your personal tax return.
Timely and accurate tax reporting is essential to avoid fines and interest. Most accounting software can help calculate and file VAT automatically.
Annual Reports and Financial Statements
If you run an ApS or A/S company in Denmark, you are required to submit an annual report to the Danish Business Authority. This includes:
- A balance sheet
- A profit and loss statement
- Notes on accounting policies and relevant disclosures
- A management report (for larger companies)
The annual report must be submitted no later than six months after the end of the financial year. Class A companies (e.g., sole proprietorships) are not required to submit reports but must still keep internal records for tax purposes.
Financial statements must be prepared according to Danish GAAP or IFRS, depending on your company type and classification.
Audit Requirements for Small Companies
Small businesses are often exempt from audit in Denmark if they meet two of the following three criteria for two consecutive years:
- Revenue below 8 million DKK
- Balance sheet total below 4 million DKK
- Fewer than 12 full-time employees
If you exceed these thresholds, you will need to have your accounts audited by a certified public accountant (statsautoriseret revisor or registreret revisor). Even if not legally required, voluntary audits can enhance transparency and improve financial credibility.
Payroll and Employee Accounting
If your business employs staff, Danish payroll regulations must be followed precisely. Employers are responsible for:
- Registering as an employer with SKAT
- Calculating wages, holiday pay, and bonuses
- Withholding and reporting A-tax and AM-bidrag (labour market contribution)
- Submitting monthly reports through the eIndkomst system
- Paying social contributions and pension funds
Payroll can be managed manually, through accounting software, or outsourced to payroll service providers. Mistakes in payroll reporting can result in significant penalties, so automation is highly recommended.
Digital Accounting Tools for Small Businesses
Denmark leads the way in digital business solutions, and accounting is no exception. Cloud-based accounting software allows entrepreneurs to manage their finances efficiently. Popular platforms in Denmark include:
- Dinero – Simple and intuitive, perfect for startups and sole traders
- Billy – Designed for freelancers and small companies with easy invoice features
- e-conomic – More advanced features for growing businesses and integrations with banks and SKAT
Most software is available in Danish and supports features like:
- Real-time bank reconciliation
- VAT automation
- Payroll integration
- Invoice creation
- Annual report generation
Using such tools helps reduce errors, saves time, and ensures compliance with Danish law.
Hiring an Accountant in Denmark
Even if you use software, hiring a professional accountant can be a smart move—especially if you:
- Are new to Danish regulations
- Need tax advice
- Plan to grow or scale your business
- Are preparing for audit or raising capital
Accountants can help with:
- Preparing financial statements
- Filing tax returns
- Offering financial planning
- Advising on VAT, deductions, and expense categorization
In Denmark, certified accountants are subject to legal and ethical obligations and must maintain high professional standards.
Accounting for International Entrepreneurs in Denmark
If you're a non-Danish entrepreneur starting a company in Denmark, it's essential to understand local accounting expectations. Foreign companies operating a branch (filial) or subsidiary (datterselskab) must:
- Maintain accounting records in Danish
- File taxes and annual reports locally
- Follow Danish bookkeeping and VAT rules
- Use local accounting software or partners to comply
Hiring a Danish accountant who understands cross-border business is highly recommended to avoid compliance issues.
Accounting in Denmark is straightforward when you understand the legal framework and have the right tools. Whether you’re a small business owner or launching your first startup, keeping proper books, managing taxes, submitting reports, and complying with payroll regulations is critical. With digital accounting software and access to professional support, managing your finances becomes more efficient and less stressful. Adhering to Denmark’s accounting standards builds a solid foundation for your business and helps you stay compliant while focusing on growth and innovation.