Running a small business in Denmark can be both rewarding and challenging. On the one hand, the country offers a transparent legal framework, excellent digital infrastructure, and access to a stable, innovation-driven economy. On the other hand, Danish law imposes strict requirements on financial reporting and compliance—even for small enterprises. Whether you are a sole proprietor, freelancer, or the owner of a small ApS (private limited company), understanding accounting principles and legal obligations is essential to running your business successfully. This article explains the core accounting requirements for small businesses in Denmark, offers practical tips, and highlights tools that can simplify your financial management.
Understanding the Danish Accounting Framework
All businesses in Denmark, regardless of size or structure, are required to comply with the Bookkeeping Act (Bogføringsloven). This law defines the rules for maintaining danish accounting records, storing financial documents, and reporting to authorities.
Small businesses must:
- Keep accurate and up-to-date records of all financial transactions
- Retain invoices, receipts, contracts, and other documentation for at least five years
- Use a bookkeeping system that complies with Danish standards (digital bookkeeping is mandatory from 2024)
- Be ready to produce financial data during audits or inspections
Even if you’re running a one-person operation, these rules apply. However, the complexity of your bookkeeping will often depend on your business type and turnover.
See also: How Defence Contractors Can Optimize Their Business Budget
Choosing the Right Accounting System
In Denmark, small businesses are strongly encouraged to use digital accounting software, especially now that digital bookkeeping has become mandatory for most business types. Approved systems help ensure compliance and significantly reduce manual work.
Popular software options for small businesses in Denmark include:
- Dinero – Designed for freelancers and small companies; simple and user-friendly
- Billy – Offers invoice creation, expense tracking, and VAT reporting
- e-conomic – Suitable for growing companies that need scalable features
- Visma eAccounting – Ideal for small businesses that need automation and payroll
These platforms are cloud-based, comply with Danish tax and bookkeeping laws, and integrate with banking and tax systems such as TastSelv Erhverv (for VAT) and NemHandel (for invoicing public sector clients).
Managing Income, Expenses, and Documentation
To stay compliant and maintain financial control, small businesses must track income and expenses meticulously. Each transaction must be supported by proper documentation, such as:
- Sales invoices – Issued to clients and customers
- Purchase invoices – Received from suppliers
- Receipts – For business-related expenses (e.g., travel, software, marketing)
- Bank statements – Reflecting all business transactions
In Denmark, it’s important to separate personal and business finances. Business owners should open a dedicated business bank account to streamline bookkeeping and prevent errors during tax assessments.
Be consistent in your processes: record transactions regularly, label documents clearly, and store them securely in your digital system.
VAT for Small Businesses
In Denmark, Value-Added Tax (VAT) is a crucial part of business operations. If your annual turnover exceeds 50,000 DKK, you are required to register for VAT through Virk.dk.
Once registered, you must:
- Add 25% VAT to the price of most goods and services you sell
- Issue invoices with your CVR and VAT number
- File VAT returns using the TastSelv Erhverv platform
- Pay VAT collected from customers minus any deductible VAT on purchases
The frequency of VAT reporting depends on your turnover. Most small businesses report quarterly, but very small companies may be allowed to report biannually.
It’s essential to keep VAT-related documentation organized, as errors or omissions in VAT filings can result in penalties and tax audits.
Payroll and Employee Accounting
Even small businesses that employ just one or two people must follow Denmark’s strict labor and payroll accounting rules. If you hire employees, you must:
- Register as an employer with SKAT
- Report salaries through the eIndkomst system
- Withhold income tax and pay employer contributions (e.g., ATP, holiday pay)
- Provide employees with monthly payslips (lønsedler)
If your small business employs freelancers or contractors, you still need to retain proper documentation and make sure they handle their own tax obligations correctly.
Many accounting programs in Denmark offer integrated payroll modules, or you can work with a payroll service provider to ensure compliance and accuracy.
Annual Reporting Obligations
Sole proprietorships in Denmark are not legally required to submit full annual financial statements, but they must still file a personal tax return with income from business activity clearly reported.
However, if your small business is structured as an ApS, even with limited turnover, you are obligated to:
- Submit an annual financial report to the Danish Business Authority (Erhvervsstyrelsen)
- File the report within 5 months of the end of your financial year
- Include a balance sheet, profit and loss statement, and relevant notes
Depending on your business’s size, an audit may or may not be required. Most small ApS companies are exempt from audits if they remain below specific financial thresholds (e.g., turnover, assets, number of employees).
Even if reporting is not required, preparing an annual overview of your finances helps you make better business decisions and can support future growth.
Common Accounting Mistakes and How to Avoid Them
Many small business owners in Denmark handle bookkeeping themselves—especially during the startup phase. While this can save costs, it also increases the risk of errors. Some common mistakes include:
- Failing to register for VAT on time
- Not keeping all receipts and source documents
- Mixing personal and business finances
- Missing VAT or tax deadlines
- Using non-compliant or outdated software
To avoid these pitfalls:
- Set up a consistent routine for recording income and expenses
- Use approved accounting software that fits your business model
- Work with a bookkeeper or accountant if needed—especially during tax season
- Stay informed about changes in Danish accounting laws and deadlines
Being proactive with your finances helps avoid stress and costly penalties later on.
Benefits of Working with an Accountant
While it’s possible to manage your own books, many small business owners choose to work with a professional accountant—particularly if they are new to Denmark or unfamiliar with local tax regulations.
An accountant can help you:
- Set up your accounting system
- Handle VAT registration and returns
- Submit tax filings on time
- Prepare year-end reports
- Offer strategic financial advice
For a small business, this partnership can be a cost-effective way to reduce risk and free up time for other tasks like marketing, sales, or product development.
There are many accounting firms in Denmark that offer services tailored to small businesses, and some even offer support in English or other languages.
Accounting may not be the most glamorous part of running a small business in Denmark, but it is undoubtedly one of the most important. From invoicing and expense tracking to VAT reporting and annual compliance, sound accounting practices keep your business legal, organized, and financially healthy.
Thanks to Denmark’s digital infrastructure and the availability of user-friendly tools, managing your business finances is easier than ever. However, it’s still crucial to understand your responsibilities, stay on top of deadlines, and seek expert advice when necessary.
By building strong accounting habits early on, you can focus more on growing your business and less on worrying about audits, fines, or tax surprises. A well-run bookkeeping system is not just a legal requirement—it’s also the foundation of your company’s success.
