Understanding Accounting in Denmark: Key Principles, Compliance, and Best Practices

Accounting in Denmark is governed by strict legal frameworks and international standards that ensure transparency, accuracy, and trust in business reporting. Whether you are launching a startup or managing an established company, understanding how accounting works in Denmark is essential for compliance, financial planning, and long-term success. This article explores the accounting landscape in Denmark, including statutory obligations, available accounting systems, tax reporting requirements, and how to navigate them effectively.

Accounting Standards and Legal Framework

Danish accounting practices are based on the Årsregnskabsloven (Annual Accounts Act), which is aligned with EU directives and International Financial Reporting Standards (IFRS). This ensures consistency and transparency in financial reporting across businesses. While IFRS is mandatory for listed companies, private limited companies (ApS) and other SMEs may follow Danish GAAP, which offers more flexibility.

The legal classification of companies into reporting classes (A to D) determines the complexity and scope of accounting requirements.

• Class A: Small enterprises and sole proprietors. 
• Class B: Small and medium-sized private companies. 
• Class C: Larger private companies. 
• Class D: Publicly listed companies. 

Each class is subject to different levels of disclosure, audit requirements, and reporting obligations.

Bookkeeping and Record-Keeping Obligations

All businesses operating in Denmark are required to maintain accurate and up-to-date accounting records. These records must include invoices, receipts, payroll documentation, bank statements, and any other financial documentation relevant to business activity. Bookkeeping must follow the principles of double-entry accounting and should be organized in a way that allows for transparency and traceability.

According to Danish law, records must be kept for a minimum of five years. They can be stored digitally, provided they are easily accessible and secure. Cloud-based accounting solutions, such as e-conomic, Billy, or Dinero, are widely used in Denmark and are especially popular among startups and SMEs.

VAT and Tax Reporting in Denmark

Value-Added Tax (VAT) in Denmark is known as moms and is set at a standard rate of 25%. Companies must register for VAT if their annual turnover exceeds 50,000 DKK. Once registered, businesses must submit periodic VAT returns – usually monthly, quarterly, or biannually depending on revenue levels.

Corporate income tax is currently 22%, and companies must submit a corporate tax return (Selvangivelse) every year, typically within six months after the end of the fiscal year. Prepayments of tax may be required depending on the company’s income levels.

Additionally, companies must file an annual report (årsrapport) with the Danish Business Authority (Erhvervsstyrelsen), which includes financial statements and other disclosures depending on the reporting class.

Auditing Requirements and Thresholds

Not all companies in Denmark are obligated to conduct annual audits. Audit requirements are based on company size and turnover. Generally, companies are exempt from audit if they meet at least two of the following criteria for two consecutive years:

• Balance sheet total under 4 million DKK 
• Net revenue under 8 million DKK 
• Fewer than 12 full-time employees
  

Larger companies and all publicly listed firms are subject to mandatory audits conducted by a registered Danish state-authorized public accountant (Statsautoriseret revisor). The audit provides assurance to stakeholders about the accuracy and completeness of financial reports.

Payroll and Employment Reporting

Managing payroll in Denmark involves accurate calculation of wages, tax deductions, pension contributions, holiday pay, and social security. Employers must report wages and related obligations through the Danish income reporting system (eIndkomst). This system ensures that tax authorities, pension funds, and other relevant entities receive real-time data.

Employers are also required to withhold A-tax (income tax) and AM-bidrag (labour market contribution of 8%) from employee salaries. Timely and accurate payroll accounting is critical to avoid penalties and ensure legal compliance.

Digital Accounting and Software Solutions

Denmark is a leader in digital transformation, and this includes accounting practices. Many companies leverage digital accounting platforms that integrate with banking systems, tax portals, and payroll services. Popular accounting tools include:

• e-conomic – A full-featured cloud accounting system tailored for Danish businesses. 
• Billy – User-friendly, ideal for freelancers and small companies. 
• Dinero – Highly popular among startups, supports automatic VAT calculations. 

Digital accounting tools streamline operations, automate compliance tasks, and reduce administrative overhead, making them an essential part of modern financial management in Denmark.

Choosing an Accountant or Bookkeeping Service

While many companies manage accounting in-house using digital tools, hiring a licensed accountant or bookkeeper can provide additional benefits, particularly for foreign investors or growing businesses. Accountants in Denmark offer services including:

• Financial statement preparation 
• Tax consulting and filing 
• Payroll administration 
• Compliance audits 
• Business advisory 

Certified accountants (registreret revisor or statsautoriseret revisor) must meet strict educational and ethical standards. Partnering with a local expert helps ensure full compliance with Danish law and can uncover opportunities for financial optimization.

Accounting for Foreign Companies Operating in Denmark

Foreign companies that establish a branch or subsidiary in Denmark must also comply with local accounting standards. This includes registering with the Danish Business Authority and maintaining Danish-language records. Depending on the legal form (e.g., ApS, filial), obligations may include VAT registration, payroll reporting, and annual financial disclosures.

It is advisable for foreign investors to work with a local accountant familiar with cross-border tax rules and the requirements of the Danish Companies Act (Selskabsloven). Proper accounting from the outset helps prevent legal and financial issues.