Company accounting in DenmarkSetting up your own business in Denmark is inextricably linked to the need for company accounting. Depending on the type of company, the requirements for bookkeeping vary with regard to the degree of difficulty, documents required, deadlines for their delivery, amount and type of taxes and regulations. Therefore, once you have decided to set up a company in Denmark, you need to think carefully about bookkeeping. In Denmark, you can do your own bookkeeping, or you can use the services of certified accountants who can professionally complete your bookkeeping and advise you on the laws governing bookkeeping in Denmark, the bank accounts offered and the rights and obligations of an entrepreneur operating in Denmark.
What are the main elements of Danish accounting? Legislation conditioning accounting in Denmark Breakdown of financial reporting obligations Accounting in sole proprietorships (Enkeltmandsvirksomhed) Accounting in companies Danish chart of accounts Company auditing in Denmark Costs that companies incur in Denmark What documents will a Danish entrepreneur have to deal with? Transport of goods What are the obligations of an employer in Denmark? Frequently asked questions
What are the main elements of Danish accounting?Accounting is an issue that is a concern for every business owner, including those operating in Denmark. It is extremely important to be thoroughly familiar with all the legal regulations and to complete all the formalities because, if you do not, you may expose your company to fines. The most relevant matters related to bookkeeping in Denmark have been collected in the infographic below.
Legislation conditioning accounting in DenmarkDenmark is a country belonging to the Scandinavian countries with a particular emphasis on social policy development. The country is also characterised by a free labour market and high taxes.
An entrepreneur running his or her own business in Denmark should become very familiar with all legal regulations and obligations, so that he or she can avoid possible financial penalties. Among the acts that condition the company's accounting in Denmark are:
- The Accounting Act (1998) - provides information for the proper organisation of a company's accounts and the proper preparation of business records and documentation. Accounting in Denmark is linked to a specific chart of accounts describing the company's profit and loss statement and summary balance sheet.
- Financial Reporting Act (2001 with amendment in 2015) - contains the information necessary for the execution of budget reports. The act describes two types of profit and loss - comparative and imputed. The reports should be performed according to the classification into which Danish companies are divided, which is presented in the infographic below.
- Act on approved auditors and audit firms (2008),
- Act on public and private limited liability companies (2009),
- Financial Activities Act (2011),
- Securities Trading Act (2012).
Breakdown of financial reporting obligationsAs mentioned in the previous paragraph, the financial reporting of companies varies according to the type of business activity, the number of employees, the value of the annual net turnover, the size of the company and the size of the asset base. Due to these differences, economic activities have been divided into four classes.
Class A comprises small and large companies with no more than 10 full-time employees. In addition, these companies have asset resources of no more than DKK 7 million, while the annual net turnover of these companies is less than DKK 14 million. Class A companies do not have to prepare financial statements (unless the company's articles of association state that they must do so), but are only required to file tax returns. Where the company's articles of association contain information regarding the preparation of financial statements, then these statements usually include a certificate of the company's board of directors, an annual balance sheet, a profit and loss statement and other information.
- small and large companies,
- no more than 10 full-time employees,
- assets < DKK 7 million,
- annual net turnover <14 million Danish kroner.
Class B includes public and private limited liability companies, limited partnerships, commercial foundations and other companies where the number of employees does not exceed 10 persons, the size of the asset base is less than DKK 2.7 million and the annual net turnover is not greater than DKK 5.4 million or the number of employees does not exceed 50 persons, the size of the asset base is less than DKK 44 million and the annual net turnover is not greater than DKK 89 million. The financial statements of a company included in Class B include an overview of the activities of the board of directors of the specified company, an annual balance sheet, a profit and loss statement, an assessment of changes in equity and other information.
- Public and private limited liability companies, limited partnerships, commercial foundations and other companies,
- no more than 10 employees or no more than 50 employees,
- assets < DKK 2.7 million or assets < DKK 44 million,
- Annual net turnover < DKK 5.4 million or Annual net turnover < DKK 89 million.
- Medium and large companies, public and private limited liability companies, limited partnerships, commercial foundations and other companies,
- no more than 250 employees or more than 50 employees,
- assets < DKK 156 million or assets > DKK 156 million,
- annual net turnover < DKK 313 million or annual net turnover > DKK 313 million.
- State-owned joint stock companies, listed companies.
Accounting in sole proprietorships (Enkeltmandsvirksomhed)Sole proprietorships are classified as Class A according to the reporting classification and, therefore, are not required to file financial statements. Accounting for sole proprietorships in Denmark is therefore, first and foremost, tax settlements with the tax office (in Denmark referred to as SKAT). In addition, accountants are also helpful at the very beginning of setting up a new company - they support the entrepreneur in drawing up an accurate description of the company, the so-called Forretningsplan. This is a document that should contain basic information about the start-up company, including the entrepreneur's plan for the development of the business, as well as the profile of the business and the expected budget.
Registering a sole proprietorship in Denmark involves registering it with the Danish Business Authority (Erhvervsstyrelsen) via the website. It is important that those seeking to set up this type of business must have a registration number (CPR). Another important piece of information for the budding entrepreneur will be the fact that setting up a company in Denmark does not require share capital and the estimated costs are set at DKK 10 000, or approximately PLN 5 000. Generally, accounting for a one-person company is not complicated, as tax on income is payable on the basis of a single tax return only, and the business owner does not have to register as a VAT payer if revenues are not higher than DKK 50 000.
The budding entrepreneur should also know that, as the owner of the company, he is liable for its obligations with all his assets. In addition, it is necessary to choose one of three taxation options:
- taxation on the basis of the Share Capital Act (Kapitalafkastordning) - according to this, part of the company's income can be transferred as personal income,
- taxation of the company's income as personal income (as for employees),
- taxation on the basis of the Enterprise Act (Virksomhedsordning) - according to this, it is possible to write off costs arising from interest on a loan in the tax return.
Accounting in companiesCompanies falling, according to the financial reporting classification, into classes B, C and D have slightly more complex accounting requirements than sole proprietorships. When wishing to register a company as a company, in Denmark it is possible to register a company in the form of a general partnership (Interessentskab), limited liability company (Anpartsselskab), limited partnership (Kommanditselskab) or joint stock company (Aktieselskab). All of these forms of business require the provision of a number of documents, about which more has been written in the paragraph Division of financial reporting obligations.
In Denmark, companies are the legal forms of business that are obliged to pay CIT at 22%, whereas if the company's annual turnover exceeds DKK 20,000, then it becomes liable for VAT and the tax is 25%. Changes to the laws that apply to companies and changes to accounting laws are overseen by an institution known as the Danish Enterprise Authority. Another important body that sets the accounting rules for companies is the Danish Accounting Standards Committee, whose task is, among other things, to draw up guidelines for the preparation of financial statements.
Danish chart of accountsWithin Denmark, every business activity is subject to recording, thanks to the so-called chart of accounts. It classifies individual accounts into classes, taking into account profits, losses and the total balance sheet. The most important groups of accounts are shown in the table below.
|1.||Account group: net revenue from sales of goods||Account number: 1100
Account name: Sale of goods
|2.||Account group: sales||Account number: 2100 Account name: sales|
|3.||Account group: other external accounts||Account number: 3100
Account name: Advertising costs
|Account number: 3200
Account name: local costs
|Account number: 3300
Account name: cash shortage
|Account number: 3400
Account name: costs of the exported vehicle
|Account number: 3900;
Account name: other costs
|4.||Account group: process costs||Account number: 4100
Account name: wages
|Account number: 4200
Account name: pension allowance
|5.||Account group: depreciation||Account number: 5100 Account name: depreciation of means of transport|
|Account number: 5200
Account name: Equipment depreciation
|6.||Account group: interest||Account number: 6100
Account name: interest (income)
|7.||Account group: interest||Account number: 7100
Account name: interest (costs)
|8.||Account group: extraordinary items||Account number: 8100
Account name: extraordinary gains
|Account number: 8200
Account name: extraordinary losses
|9.||Account Group: Accounting||Account number: 9000
Account name: corporate income tax
|10.||Account group: Fixed assets||Account number: 112
Account name: tangible assets
|Account number: 11120
Account name: cars
|Account number: 11121
Name of the account: write-downs on cars
|Account number: 11130
Account name: furniture
|Account number: 11131
Account name: write-downs on furniture
|11.||Account group: Current assets||Account number: 121
Account name: stocks
|Account number: 12110
Account name: composition
Account name: receivables
Account name: Receivables from customers
Account name: accruals
Account name: funds
Account name: checkout
Account name: bank account
Account name: savings account
|12.||Account group: capitals||Account number: 121
Account name: share capital
|Account number: 134
Account name: reserve capital
|Account number: 135
Account name: financial result
|13.||Account group: liabilities||Account number: 141
Account name: long-term liabilities
|Account number: 14110
Account name: mortgages
|Account number: 142
Account name: Current liabilities
|Account number: 14210
Account name: working capital loan
|Account number: 14220
Account name: receivables
|Account number: 14230
Account name: from pension supplement
|Account number: 14240
Account name: for labour market contributions
|Account number: 14250
Account name: for taxes
|Account number: 14250
Account name: tax settlements
|Account number: 14290
Account name: other liabilities
|Copies||Account number: 21000
Account name: profit and loss account
|Account number: 22000
Account name: balance
Company auditing in DenmarkIn Denmark, the auditing of companies, or so-called audit, is regulated by the Financial Reporting Act. Checking the correctness of a company's accounts is carried out by auditors who should have no connection with the company. The audit can vary in scope and, depending on this, the following types of audit are distinguished:
- financial audit - an overall assessment of the budget report to check that all the financial information provided by the company's authorised person is factually correct and that it meets all the requirements written in the Danish documents,
- compliance audit - an assessment of whether all systems and operations relating to finances comply with applicable legislation,
- management audit - assessing the degree of reasonableness in the financial management of a business activity,
- QA (quality assurance) - quality control of the financial statements maintained by Danish companies
Every entrepreneur should know that, in addition to the external audit, it is incumbent on every company to internally audit the company's finances. According to good audit practice, the entity performing such an audit should not be dependent on the manager of the company in question for the planning of its activities and their implementation.
Since 2011, there has been an organisation in Denmark, called FSR, which provides professional accounting assistance regarding the company's balance sheet analysis, auditing and tax checking. This cell was established as a result of the merger of the following organisations: FSR (Danish Statutory Auditors), FRR (Danish Institute of Certified Public Accountants) and REVIFORA (Association of Young Accountants).
Auditors in Denmark, i.e. national authorised public accountants (SPAs) acting as auditors and audit firms, are audited by the Audit Supervisory Authority (DSAA) every six years.
Costs that companies incur in DenmarkCompany accounting in Denmark includes an analysis of companies' expenses, income and financial balance sheets. The Danish balance sheet template shows asset resources ranked according to increasing liquidity and the sources of these resources including a split between equity and debt capital. A model for such a balance sheet is shown in the table below.
|1.||Non-current assets||Intangible assets||Patents, concessions, trademarks held (from development projects)|
|Patents, licences, trademarks held (acquired)|
|Development projects in progress|
|Material values||Land and buildings|
|Equipment and machinery owned|
|Advances paid on fixed assets|
|Financial assets||Shares in related companies|
|Revenue from related companies|
|Investment projects in associated companies|
|Income from associated companies|
|Other investment projects|
|2.||Current assets||Stocks||Raw materials and supplies held|
|Production processes under way|
|Advances paid for certain goods|
|Production process contracts in progress|
|Revenue from related companies|
|Income from associated companies|
|Investment projects||Investment projects in related companies|
|Other investment projects|
|Capital (initial capital, agio, reserve funds, profit/loss balance sheet)|
|Commitments of short and long duration|
|Settlement between accounting periods|
What documents will a Danish entrepreneur have to deal with?You can find a lot of information about any company operating in Denmark on the website of the Danish Enterprise Authority (Erhvervsstyrelsen) regarding its registration, accounting and operations.
Information that can be found on the authority's website:
Company registration number (CVR)
Company name, address and contact details
Date of establishment
Type of business activity
Details of the company's managers, number of employees
Company accounting information
Divisions of the company
- the tax return form (Selvangivelse) issued by the Danish Tax Authority,
- the tax decision document (Arsopgorelse) sent out by the Tax Office every year after 2 July (with information about the surcharge or refund),
- a document issued at the end of the employment relationship containing the total earnings for the entire period of employment (Oplysningsseddel),
- a tax return document to be submitted within six months of the end of the tax year.
It is the duty of employers in Denmark to keep employee documents for a period of 5 years after the end of the employment relationship.
Transport of goodsDenmark is a country that imports and exports goods mainly with countries belonging to the European Union. Among the most frequently imported goods are, inter alia, machinery, processed products and products and chemicals, while among the exported goods are foodstuffs, animals and chemical products. The main institution dealing with the exchange of goods between Denmark and other countries is the Danish Export Council.
Customs duty is calculated in Denmark on the basis of the price of the goods on the invoice plus insurance and transport expenses, the so-called customs value of the product. Entrepreneurs should also be aware of the value added tax, which is 25 % and is included in the case of agricultural products, industrial products and services.
Another important piece of information is that the value of excise duty varies depending on the type of goods - it differs for coffee, tobacco products, chocolate products, beer, wine, light bulbs or cars and fuel, among others.The Danish Veterinary and Food Administration is responsible for issuing licences for importing and exporting food products. It is important to note that imported products, particularly food products, must be labelled with their ingredients translated into Danish and must also comply with Danish standards regarding preservative content.
When seeking permission to trade in cosmetics and household chemicals, the Department of Chemical Products of the Ministry of the Environment should be contacted, as this is the authority that deals with issuing permits in this area. Entrepreneurs should also bear in mind that the importation of chemicals that may be hazardous should be preceded by a check of the status of the substance on the national list of hazardous substances.
Another important mark with which certain products should be marked is the CE mark. This applies to toys, appliances, electrical products, construction products, freezers and refrigerators, diagnostic equipment, medical implants, gas appliances and boats and yachts, among others.
Any trader planning to transport goods with other countries should first familiarise themselves with the law that explains the rules of contracting - the Contact Law. Other documents relevant to this process are listed below:
- United Nations Convention on Contracts for the Sale of Goods.
- Agreement on industrial, scientific and technical cooperation - 11.1974.
- Agreement on the development of economic cooperation - 05.1976.
- Agreement on the prevention of double taxation - 04.1976, as amended in 1992.
- Agreement on promotion and mutual protection of investments - 05.1990.
- Agreement on mutual assistance in customs matters - 1992.
- Agreement on cooperation in the field of energy - 1990.
- Agreement on cooperation in the field of environmental protection - 1990.
What are the obligations of an employer in Denmark?Any start-up entrepreneur with a company in Denmark should read the Employment Document Act before hiring employees. Every employee starting work in a Danish company should receive a document in which all the basic working conditions would be included. In addition, Danish employees are protected by so-called collective agreements - agreements between employers and employees through trade unions.
Employers should prepare the working conditions for employees in such a way that it is possible to comply with Danish labour law and the health and safety regulations published on the website of the Danish Labour Inspection Authority. Posting work in Denmark entails compliance with the guidelines of the European Union's Posting of Workers Directive of 16.12.1996 and the Danish Posting of Workers Act of 15.12.1999.
Frequently asked questions
- What are the guidelines for bookkeeping in Denmark?
Danish accounting is subject to the European Union's 2002 regulation on the application of international accounting standards, according to which it is necessary to use the guidelines set out by IFRS.
- What is the term a-kasse?
A-kasse is an unemployment insurance fund. Such insurance is not compulsory in order to receive benefits after unemployment, but one must then become a member of a-kasse.
- How do I translate the statements Skat til udbetaling and Restskat til betaling?
Skat til udbetaling is the wording on the tax decision from the office, meaning the amount of the tax refund, while Restskat til betaling means the amount of the SKAT surcharge.
- What is NemKonto?
NemKonto is an employee bank account into which SKAT tax refunds and work pay are transferred.
- What is Feriepenge and who is entitled to it?
Feriepenge is a holiday benefit to which all persons legally working in Denmark are entitled. A Danish worker is entitled to 2.08 days' holiday for each month worked, i.e. 5 weeks, but the requirement is that a minimum of 3 weeks of the 5 weeks' holiday must be taken during the holiday period, i.e. between 1 May and 30 September. Feriepenge is paid into a NemKonto.
- What is Feriekonto?
Feriekonto is a special fund into which employers must pay their employees' holiday contributions (12% of gross salary less 8% allocated for social purposes).
- What is the waiting period for receiving a tax refund?
You have to wait approximately 6 months to receive your tax refund from the Tax Office in Denmark.
- What are Årsopgørelsen?
Årsopgørelsen are tax decisions that can be found on the Danish Tax Administration's website.
- What are the Danish tax allowances?
- Allowance for commuting from accommodation and residence to work,
- relief on accommodation,
- relief on meals.
- What is a pension? What is a folkepension?
Pension is the Danish private pension accumulated in private pension funds, while folkepension is the Danish state pension to which all Danish citizens over 65 are entitled.
- What is ATM?
ATM is the Danish occupational scheme that is part of the second pension pillar and covers all o Danish citizens over the age of 16.
- What is the health card - DK?
The Danish health card, the so-called yellow card, is compulsory and must be set up by anyone planning to stay in Denmark for more than 3 months.