Accounting in Denmark – A Complete Guide to the Danish Accounting System and Tax Compliance

Accounting in Denmark is a highly structured and regulated process that ensures financial transparency, tax compliance, and business credibility. Whether you’re launching a startup, expanding your international business, or managing a Danish subsidiary, understanding the Danish accounting system is essential. This guide will walk you through how accounting in Denmark works, who is responsible for financial reporting, and how to stay compliant with local laws.

The Danish Accounting System Explained

Denmark is known for its transparency and efficiency in both public and private sectors. The Danish accounting system reflects these values with clear laws and standardized procedures. All businesses registered in Denmark are required to maintain accurate financial records and follow bookkeeping and reporting standards defined by the Danish Bookkeeping Act (Bogføringsloven) and Annual Accounts Act (Årsregnskabsloven).

Accounting in Denmark is not only about financial reporting—it’s closely tied to taxation, VAT compliance, payroll management, and corporate governance. Businesses that fail to meet accounting obligations may face penalties or increased scrutiny from the Danish Tax Agency (SKAT) or the Danish Business Authority (Erhvervsstyrelsen).

Who Is Required to Keep Accounting Records in Denmark?

All legal entities operating in Denmark are required to keep accounting records. This includes:

• Sole proprietorships (Enkeltmandsvirksomhed),
• Private limited companies (ApS),
• Public limited companies (A/S),
• Partnerships (I/S or K/S),
• Foreign entities with a Danish VAT number or permanent establishment.

Even micro-businesses and freelancers must follow bookkeeping and tax rules. While the complexity of the required reporting may vary depending on company size, all businesses must maintain detailed records of revenue, expenses, assets, liabilities, and taxes.

Bookkeeping and Documentation Standards in Denmark

Bookkeeping in Denmark must be systematic, chronological, and supported by proper documentation. Businesses are required to:

• Record every transaction in a timely manner,
• Issue legally compliant invoices,
• Store financial documentation for at least 5 years,
• Maintain books in Danish kroner (DKK),
• Use structured formats that allow auditing and reporting.

Most companies today use cloud-based accounting software, such as Dinero, e-conomic, or Microsoft Dynamics, which simplifies day-to-day operations and integrates with SKAT systems. Digital bookkeeping ensures faster reporting, reduces human error, and provides instant access to financial insights.

Tax Reporting and Accounting Compliance in Denmark

Accounting in Denmark is directly tied to tax reporting and compliance. Businesses must submit various reports and declarations throughout the year, including:

• VAT returns (MOMS) – typically filed monthly or quarterly via the TastSelv Erhverv portal,
• Corporate income tax (CIT) – currently set at 22% and filed annually,
• Payroll taxes and labor market contributions, if the business employs staff.

The Danish tax system is known for being highly digitized. The TastSelv system allows businesses to file all tax-related documents online. To ensure accuracy, companies often rely on certified accountants or bookkeepers who handle these tasks on their behalf.

Annual Financial Statements in Denmark

One of the cornerstones of accounting in Denmark is the preparation and submission of annual financial statements. These reports provide a detailed overview of a company’s financial health and must comply with the Danish Annual Accounts Act.

Key components of the annual report include:

• Balance sheet,
• Income statement (P&L),
• Cash flow statement (for larger entities),
• Notes and supplementary disclosures,
• Management statement and auditor’s report (where applicable).

All ApS and A/S companies are legally obligated to submit annual reports to the Danish Business Authority (Erhvervsstyrelsen). Depending on company size, these statements may also require auditing by an external certified public accountant.

Deadlines:

• Annual reports must be filed no later than 6 months after the end of the financial year.
• Corporate tax returns are due no later than 6 months and 20 days after year-end.

Failure to comply may result in fines, deregistration, or even compulsory dissolution.

VAT and Accounting in Denmark

VAT (value-added tax), locally known as MOMS, is a key element of the Danish accounting system. The standard VAT rate is 25%, and businesses exceeding DKK 50,000 in annual turnover must register for VAT.

Key VAT accounting duties:

• Issue VAT-compliant invoices,
• Record all incoming and outgoing VAT,
• File accurate VAT returns through SKAT’s portal,
• Store related documentation for audits.

Danish VAT rules also apply to cross-border services and e-commerce, and the correct application of VAT depends on whether the customer is inside or outside the EU. Many companies use accounting software that automates VAT tracking and filing to ensure error-free compliance.

Payroll Accounting and Employer Obligations

If your business employs workers in Denmark, payroll accounting becomes an essential part of your financial processes. Employers must:

• Register as an employer with SKAT,
• Withhold A-tax (income tax) and ATP (labor market contributions),
• Report salaries through the eIncome system,
• Provide payslips and employee declarations.

Danish employment law requires accurate reporting of all wage-related data, and incorrect or late reporting may result in penalties. Payroll can be managed in-house or outsourced to payroll specialists who handle tax reporting and compliance.

Choosing an Accountant or Bookkeeping Service in Denmark

While small business owners can manage basic accounting tasks themselves, the complexity of Danish accounting laws often leads companies to work with local professionals. Danish accountants (revisorer) are well-versed in national and EU tax law, financial reporting, and audit requirements.

Benefits of working with an accountant in Denmark:

• Help with tax optimization and deductions,
• Accurate VAT and income tax filings,
• Compliance with labor and payroll regulations,
• Preparation and submission of financial statements,
• Audit readiness and consulting.

Many accounting firms offer bilingual services in English and Danish, which is particularly useful for foreign entrepreneurs. Outsourcing your accounting also saves time and ensures peace of mind when dealing with government authorities.

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Common Accounting Mistakes to Avoid in Denmark

Even in a highly digital environment like Denmark, accounting errors can lead to serious consequences. Common mistakes include:

• Delayed VAT filings or payments,
• Missing documentation for business expenses,
• Incorrect invoice formats or VAT rates,
• Inadequate payroll records,
• Non-compliance with annual reporting deadlines.

To avoid such issues, it’s crucial to implement a reliable accounting system early, use professional software, and consider regular consultations with an accountant.

A well-organized accounting system in Denmark is more than just a legal requirement—it’s the backbone of sustainable business growth. Danish authorities expect transparency, punctuality, and digital readiness, and businesses that meet these expectations enjoy a smooth operational environment.

Whether you’re a startup founder, freelancer, or managing a multinational operation, understanding accounting in Denmark is essential. From VAT compliance to annual reporting, payroll management to financial planning, investing in proper accounting pays off long-term.

Stay compliant. Stay informed. And most importantly—stay in control of your business finances in Denmark.