The Bookkeeping Act: requirements for SMEs

The Danish Bookkeeping Act in practice for SMEs

In 2024 a new and modernised Bookkeeping Act (bogføringsloven) came into force for Danish businesses. For many owners of small and medium-sized enterprises (SMEs) it is hard to navigate what the law actually requires: what must be recorded, what must be kept, and when do the digital requirements apply?

This guide gives you a practical run-through of the Bookkeeping Act, tailored to the everyday life of SMEs. We focus on the requirements that actually have consequences for you, and what you need to do to comply with them.

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What is the duty to keep books?

All commercial enterprises in Denmark have a duty to keep books. This applies regardless of the size of the turnover, and regardless of whether you run an ApS, a sole proprietorship, a general partnership (I/S) or an association with commercial activity.

The bookkeeping duty means that you must record all your business's transactions on an ongoing and timely basis: purchases, sales, wage costs, VAT settlement and everything else that moves money in and out of the business.

Who is covered?

• All companies (ApS, A/S, I/S)
• All sole proprietorships, regardless of turnover
• Foundations and associations with commercial activity
• Foreign businesses with activity in Denmark

If you have a sole proprietorship with a modest turnover, you still have a duty to keep books. The turnover threshold of DKK 300,000 is not about whether you must keep books, but about when you become covered by the requirement for a digital bookkeeping system (see below). Whatever the case, you must be able to document your taxable income to the Danish Tax Agency (Skattestyrelsen).

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The most important requirements in the new Bookkeeping Act

1. Digital bookkeeping, phased in gradually

The new Bookkeeping Act contains a requirement that businesses keep their books digitally. The requirements are phased in gradually:

• From 1 July 2024: Businesses with a duty to file an annual report under the Danish Financial Statements Act (typically companies such as ApS and A/S, reporting class B and up) must keep their books digitally and store supporting documents digitally
• From 1 January 2026: Personally owned businesses, associations and others without a duty to file an annual report become covered if their net turnover exceeds DKK 300,000 in two consecutive income years

An approved digital bookkeeping system must meet the Danish Business Authority's requirements, including ongoing and secure storage (backup) and the ability to export data in a standardised format (SAF-T).

2. Recording must be done in good time

The law requires that bookkeeping is done "as soon as possible" after a transaction. In practice this means:

• Ongoing recording, not once a month, and definitely not once a year
• Invoices, receipts and supporting documents must be handled within a reasonable time
• For VAT-registered businesses: settlement is monthly, quarterly or half-yearly, so the bookkeeping must keep up

3. Retention of documents for 5 years

You must keep all accounting material for at least 5 years, counted from the end of the financial year the material relates to. This applies to:

• Invoices (both issued and received)
• Receipts and till slips
• Bank statements
• Payslips and pay agreements
• Contracts of significance for the business's finances

If you are covered by the digital bookkeeping requirement, the documents must be stored digitally, and they must be capable of being shown to the authorities on request. A random spreadsheet in a folder is not sufficient.

4. Requirements for the bookkeeping system itself

The digital bookkeeping system you use must:

• Record all transactions chronologically
• Support double-entry bookkeeping
• Generate accounts that can form the basis for the annual report
• Protect data against deletion and manipulation
• Ensure backup, so data is not lost

Popular systems that meet the requirements include e-conomic, Billy, Dinero and Uniconta. An up-to-date list of registered bookkeeping systems is available from the Danish Business Authority (Virksomhedsguiden).

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GDPR and bookkeeping, an underestimated overlap

Many SMEs overlook the fact that bookkeeping involves the processing of personal data. Your customer invoices contain names and addresses. Your payslips contain CPR numbers and pay data.

This means that as a business with a duty to keep books, you are also a data controller in the GDPR sense. And if you use an external bookkeeping system, which the vast majority do, the provider is your data processor.

That requires a data processing agreement.

Many standard contracts with bookkeeping-system providers already contain a data processing agreement, but you should check whether you have actually accepted it, and whether it meets the Danish Data Protection Agency's requirements.

Read more in our GDPR compliance checklist for SMEs.

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What happens if you do not comply with the Bookkeeping Act?

The consequences of a lack of bookkeeping can be serious:

Fine and criminal liability

A breach of the Bookkeeping Act can lead to a fine. In serious cases, for example systematic failure to keep books in order to avoid tax, imprisonment can be a possibility.

Problems with the Tax Agency

If the bookkeeping is missing, the Tax Agency has the right to make a discretionary assessment of your income. This means the Tax Agency sets your taxable income on the basis of its own calculations, and that is rarely to your advantage.

Problems on a business sale or credit

Do you want to sell your business, take out a loan or attract investors? Deficient bookkeeping gives potential buyers and banks a poor signal and can block the process.

Read more about what you should have in order in our guide to starting a new business.

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Bookkeeping and business structure

The requirements for your bookkeeping depend in part on your form of business. Here are the most important differences:

Sole proprietorship

• The bookkeeping duty always applies, regardless of turnover
• The requirement for a digital bookkeeping system takes effect from 2026 if net turnover exceeds DKK 300,000 in two consecutive income years
• No duty of audit or published annual accounts
• But: the Tax Agency can always request documentation

ApS and A/S

• Full bookkeeping duty and digital bookkeeping regardless of size
• Duty to prepare an annual report and file it with the Danish Business Authority
• The requirement for an auditor's report depends on the size of the company (reporting class)

Are you considering switching from a sole proprietorship to an ApS? See our comparison of sole proprietorship and ApS.

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Practical checklist: does your business comply with the Bookkeeping Act?

Use this checklist for a quick review:

• Do I keep books on an ongoing basis, not only at the year-end close?
• Do I use a digital, approved bookkeeping system (if I am covered by the requirement)?
• Do I keep all accounting material for at least 5 years?
• Are my documents organised and easily accessible?
• Do I have a data processing agreement with my bookkeeping provider?
• Are my VAT returns correct and filed on time?
• Am I aware of the deadlines for the annual report (if relevant)?

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When should you use an auditor?

The Bookkeeping Act sets requirements, but an auditor is not mandatory for all businesses. For most SMEs the position is:

• Reporting class A (the smallest, for example sole proprietorships): no audit duty, but an audit can still be recommended
• Reporting class B (typically ApS and A/S): can, within certain size thresholds, opt out of audit entirely. If you opt out of audit, you can as a lighter alternative choose an auditor's extended review, but it is not a requirement
• Reporting classes C and D: audit duty

Even if you have no audit duty, an auditor can add great value, not just to the accounts, but to the running of your business as a whole.

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Legal documents and bookkeeping go together

Good bookkeeping requires more than an accounting program. You must also have your legal documents in order, the documents that support your transactions:

• Employment contracts document wage obligations
• Contracts with suppliers support the documents for expenses
• Articles of association establish who has the right to bind the company
• Data processing agreements ensure GDPR compliance when using third parties

When you start a new business, it is crucial to have the documents in place from day one. See our complete checklist of documents for a new business.

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Typical mistakes SMEs make with bookkeeping

Even though the requirements in the Bookkeeping Act are clear, auditors and tax advisers see the same mistakes again and again:

Mistake 1: Mixing private and business finances

This is a classic, especially in sole proprietorships and among owners of small ApS companies. Private expenses are paid via the business account, and business expenses are paid privately. The result is accounts that do not give a true and fair picture, and a tax audit that is hard to get through.

Solution: Separate bank accounts from day one. Always pay business expenses from the business account and private expenses privately.

Mistake 2: Missing documents for transactions

"I lost the receipt" is not an acceptable explanation in a tax audit. Without documentation, the entry cannot be approved, and the Tax Agency can disallow the deduction.

Solution: Use your bookkeeping software to photograph and attach documents directly to the entry. Most modern systems (e-conomic, Billy, Dinero) support this.

Mistake 3: VAT settlement on the wrong basis

Many SMEs calculate VAT incorrectly, especially on trade with other countries, partially deductible expenses and mixed VAT-liable/VAT-exempt activity.

Solution: Review the VAT basis with your auditor once a year. Mistakes discovered early are cheap to fix. Mistakes discovered on audit cost a fine and interest.

Mistake 4: Not updating the bookkeeping on an ongoing basis

Many owners "catch up" and do the books once a quarter, or only at the year-end. This does not comply with the Bookkeeping Act, and it gives a poor basis for management.

Solution: Set fixed routines: do the books at least once a week. A quarter of an hour's work a week is far easier than a hectic clean-up before the year-end close.

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FAQ: The Bookkeeping Act for SMEs

Do I need an auditor for the bookkeeping?

No, bookkeeping and audit are two different things. You can handle the bookkeeping yourself with an approved system. The auditor's role is to review and give an opinion on the annual report, not to do the ongoing bookkeeping.

What is SAF-T, and should I worry about it?

SAF-T (Standard Audit File for Tax) is a standardised format for exporting accounting data to authorities and auditors. Most approved bookkeeping systems can generate SAF-T. You do not need to worry about it actively, but make sure your system supports it.

Can I keep my books in Excel?

For the businesses subject to the requirement for an approved digital bookkeeping system, Excel is not sufficient. Excel does not provide the required protection against manipulation, automatic backup or SAF-T export.

When must the VAT return be filed?

It depends on your settlement period: monthly (large businesses), quarterly or half-yearly (most SMEs). For quarterly and half-yearly settlement the deadline is typically the 1st of the third month after the end of the period, while monthly settlement has a deadline of the 25th of the following month. Check your specific deadline at skat.dk.

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Get started with digital bookkeeping and legal documents

The Bookkeeping Act is not something you can put off. The sooner you get your bookkeeping in order, and the legal documents that support it, the better placed you are.

LegalDock gives you access to legally verified document templates that you can create and download in a few minutes. Use them as the basis for your business documentation, and make sure your bookkeeping and your legal obligations go hand in hand.

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This article is informational and does not constitute legal advice. If you have questions about your specific situation, it is recommended to contact an auditor or lawyer.