Denmark Modernizes Its Bookkeeping Act to Promote the Digitalization of Accounting

Denmark Bookkeeping Act

Last May, the Danish parliament passed a package of reforms affecting the Danish Bookkeeping Act (Act no. 700 of May 24, 2022), which replaces the previous act that had been in force since 1999. The main objective remains to strengthen the fight against tax fraud and increase the degree of digitalization of Danish companies' accounting records.

The requirement for digital accounting includes the following two basic accounting duties:

  1. Record the company's transactions in a digital accounting system and 2.
  2. Store the records and attachments documenting the records in a digital accounting system, or at least store a complete backup copy of the records, on a server with a vendor or other third party.

The new Accounting Law has been in force since July 1, 2022 but the mandatory digital accounting and storage requirements will be implemented over the next few years. The new requirements will take effect from January 1, 2023, with a gradual phase-in until 2026. The phase-in will allow companies and digital accounting system providers enough time to adapt to the new requirements while taking advantage of the benefits of automated accounting systems starting in 2023.

The new law requires businesses to digitize their accounting records. This change is significant because it will make it easier to track financial information and make better decisions. A digital accounting system that has been approved by the Danish authority must be used, and it must meet a number of requirements that have been defined by the Danish government through an executive order. The Danish government is soon going to expand the information available on certification for digital suppliers. This will allow suppliers to be verified and certified in a more efficient way.

The most relevant dates, still to be confirmed, are:

  • January 1, 2023: The new requirements for standard digital accounting systems come into effect.
  • July 1, 2023: The new requirements for digital accounting system certification come into effect.
  • October 1, 2023: Expected deadline for conversion of digital accounting systems to the new requirements and notification to the Danish authority.
  • July 1, 2024: Companies are expected to use a registered accounting system as of the fiscal year beginning on or after July 1, 2024. 
  • January 1, 2026: Other companies and partnerships with an annual net turnover exceeding DKK 300,000 (about €40,000) for two consecutive years must report using the digital accounting system.

Requirements for digital accounting systems in Denmark

According to the new Article 15, three basic requirements apply to any digital accounting system, whether it is a standard system or a specially developed system. 

  • The system must be able to record company transactions with the specification of attachments for each record and store records and attachments for five years.
  • The system must meet recognized IT security standards, including user and access management, as well as ensuring automatic backup of records and attachments.
  • The system must be able to automatically send and receive electronic invoices, as well as account for transactions in a public standard accounting system.

Specific requirements for digital accounting systems are included in a draft executive order, which is expected to go into effect on January 1, 2023. However, there will be a transition period for existing accounting systems.

e-Invoicing in Denmark

Since 2005, it has been mandatory for both Danish government authorities and their suppliers to use e-Invoices in the Peppol BIS 3.0 format via the Peppol network, thereby connecting with public entities registered in the national SMP NemHandel.

Denmark is also considering implementing electronic ordering and cataloging for specific categories of goods, thus encouraging the use of e-commerce in the public sector.

In the B2B sector, companies have the freedom to use e-Invoicing as long as they both agree to do so.

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