Starting and running a business in Denmark requires a solid understanding of accounting rules and tax regulations. Denmark offers a business-friendly environment with a transparent tax system, but it is essential for entrepreneurs to keep track of their financial obligations. Whether you run a sole proprietorship or a limited company, knowing how to manage bookkeeping, VAT, and tax declarations can help you avoid penalties and ensure financial stability. This guide covers the key aspects of accounting Denmark and provides practical advice for business owners.
Choosing a Business Structure and Its Accounting Requirements
The business structure you choose in Denmark affects your accounting and tax obligations. The most common business structures are:
- Enkeltmandsvirksomhed (Sole Proprietorship) – A simple business form where the owner has full personal liability for the company’s debts. Requires basic bookkeeping but fewer administrative requirements compared to larger companies.
- ApS (Anpartsselskab, Private Limited Company) – Requires a minimum capital of 40,000 DKK and is considered a separate legal entity, which limits the owner’s liability. ApS companies must follow strict accounting regulations, including submitting annual reports.
- A/S (Aktieselskab, Public Limited Company) – Suitable for larger businesses, requiring a minimum capital of 400,000 DKK. A/S companies must comply with comprehensive accounting and reporting standards.
- PMV (Personligt ejet mindre virksomhed, Small Business Sole Proprietorship) – A simplified form of sole proprietorship, which does not require VAT registration if annual revenue is below 50,000 DKK.
Each business type has different accounting and reporting obligations, so it is essential to choose the one that best suits your needs.
Registering Your Business and Obtaining a CVR Number
All businesses in Denmark must be registered with Erhvervsstyrelsen (Danish Business Authority) via the Virk.dk portal.
Steps to register a business:
- Obtain a NemID – A digital identification used for online business transactions and communication with authorities.
- Register on Virk.dk – Once registered, the business receives a CVR number, which serves as its official company identification.
- Register for VAT (Moms) if revenue exceeds 50,000 DKK per year.
- Open a business bank account – Mandatory for ApS and A/S companies.
The registration process is straightforward and typically completed within 24 hours.
Accounting Obligations for Businesses in Denmark
All businesses in Denmark must comply with accounting regulations to ensure transparency and legal compliance.
- Recording all income and expenses – Businesses must document all financial transactions and keep invoices and receipts.
- Storing financial records for at least five years – Applies to both digital and paper records.
- Submitting annual reports – ApS and A/S companies must submit financial statements to Erhvervsstyrelsen.
- Filing VAT returns (Momsindberetning) – Businesses registered for VAT must submit periodic VAT reports.
While sole proprietorships have simpler bookkeeping requirements, it is still crucial to maintain accurate financial records.
VAT in Denmark – What You Need to Know
VAT (Moms) is a key part of accounting for most businesses in Denmark.
- Standard VAT rate: 25% – Unlike some countries with multiple VAT rates, Denmark applies a flat rate of 25% to most goods and services.
- Mandatory VAT registration – Businesses with an annual revenue exceeding 50,000 DKK must register for VAT.
- VAT reporting frequency – Businesses must file VAT returns monthly, quarterly, or annually, depending on their revenue.
- VAT deductions – Businesses can deduct VAT on purchases related to their operations.
Using an accounting software can help automate VAT calculations and avoid errors in reporting.
Income Tax and Corporate Tax in Denmark
Denmark’s tax system varies depending on the business structure.
- Income tax for sole proprietorships (Enkeltmandsvirksomhed) – The tax rate follows a progressive scale ranging from 8% to 55%, depending on annual income.
- Corporate tax (CIT) for ApS and A/S companies – A fixed corporate tax rate of 22% applies to company profits.
- Prepaid tax payments – Businesses can make advance tax payments to avoid large tax bills at the end of the fiscal year.
To optimize tax payments, it is advisable to consult an accountant to ensure the best tax strategy and take advantage of deductions.
Digital Accounting and Accounting Software
Denmark encourages digital accounting, and most businesses use accounting software to manage their finances efficiently.
Popular accounting software in Denmark:
- Dinero – Ideal for small businesses and startups.
- e-conomic – Used by medium and large enterprises.
- Billy – A simple and effective solution for sole proprietorships and small businesses.
Using digital tools can help automate financial processes and ensure timely submission of reports.
Payroll and Employer Responsibilities in Denmark
If your business employs staff, you must comply with payroll regulations and employer obligations.
- Register as an employer – Businesses must register with the Danish Tax Authority.
- Income tax and social contributions – Employers must deduct income tax from employee wages and pay employer contributions.
- eIndkomst system – All payroll and tax reports must be submitted digitally to the Danish tax authorities.
A well-structured payroll system is essential to ensure compliance with tax and employment laws.
Common Accounting Mistakes and How to Avoid Them
Many businesses make accounting errors that can lead to financial losses or penalties. Common mistakes include:
- Not registering for VAT on time – If your business exceeds 50,000 DKK in revenue without VAT registration, you may face fines.
- Incorrect expense reporting – Only business-related expenses can be deducted.
- Late tax and VAT filings – Delays in submitting tax returns can result in fines and other penalties.
To avoid these issues, businesses should use accounting software and consider hiring a professional accountant.
Accounting in Denmark can be straightforward if you understand the rules and deadlines. Whether you run a small business or a larger company, it is essential to manage taxes, VAT, and payroll correctly. Using digital accounting tools and staying up to date with financial regulations can help streamline operations and ensure compliance. If you are uncertain about handling accounting tasks, hiring a professional accountant can be a valuable investment in your business’s success.
