What is the new bookkeeping law that is getting implemented in EU?
As a business owner or head of finance, you know how overwhelming it can be to keep up with constantly changing regulations. And the latest change – the new bookkeeping act – is no exception.
Is manual bookkeeping putting a strain on your time and resources? There may be more efficient ways to divide those assets to better support your business.
Don't worry - our guide to the new bookkeeping act will help you easily navigate the complexity of the legislation
The implementation of this new bookkeeping act is expected to improve your efficiency, by streamlining the process and freeing up more time for you to focus on other tasks.
The Bookkeeping Act, which became effective on 24 May 2022, is a significant milestone in promoting the digitalization of bookkeeping and streamlining companies' reporting procedures to authorities.
The mandate for digital bookkeeping and digital bookkeeping systems will simplify the process of recording purchases and sales, reconciling accounts with banks, and submitting annual accounts and VAT reports. A "Business case" made by PWC, presented a proposal for a new bookkeeping law" published in 2022 estimates that this initiative will provide Danish companies an annual administrative relief of DKK 2.9 billion, making it the largest reduction of regulatory burdens ever implemented in Denmark's business community.
With the Bookkeeping Act in place, companies can easily comply with regulations, ensuring greater security for the storage of their accounting material, particularly in cases where cybercrime may occur.
Who should do bookkeeping and who should do digital bookkeeping?
- If your business is required to keep accounts under the Danish Financial Statements Act, you must keep digital records.
- The same applies to other businesses, associations, etc. if your net turnover from business operations for two years exceeds DKK 300,000.
- Finally, bookkeepers and others who carry out bookkeeping for other companies are also covered by the rules.
Digital accounting: what rules apply and when?
- 1 February 2023: Requirements for standard digital bookkeeping systems enter into force.
- 31 October 2023: Providers have until 31 October 2023 to notify their bookkeeping system to the Danish Business Authority if it is to be registered as a digital standard bookkeeping system as of 1 January 2024.
- 1 November - 31 December 2023: Notified systems will be checked and registered by the Danish Business Authority. NB: Registration will take place if the notified system fulfils the requirements for standard digital bookkeeping systems.
- 1 January 2024: Notified systems are registered.
- 2024 (expected): Companies subject to the accounting obligation must keep digital accounts from the financial years beginning after 1 July 2024.
- 2026 (expected): Privately-owned companies and certain associations will have to keep digital accounts from financial years starting after a yet, undetermined entry into force date in 2026.
Please note that the above timetable only concerns the requirements for standard digital accounting systems.
The requirements for customised accounting systems will also only enter into force at a later stage. The requirements for these will be prepared in the first half of 2023.
The Danish Business Authority will inform about requirements and dates of entry into force on this page as they become available. They will also update the page with information about deadlines.
Requirements for standard digital accounting systems
The Danish Bookkeeping Act and the Executive Order on requirements set three basic requirements for standard digital bookkeeping systems:
- The system must support a continuous registration of the company's transactions with an indication of supporting documents for each registration and satisfactory storage of registrations and supporting documents for five years.
- The system must have appropriate technical and organisational IT security measures to ensure that the system has a high level of IT security at all times in relation to the functions that a standard digital bookkeeping system must support, e.g. user and access management and automatic backup of records and supporting documents.
- The system must support the automation of administrative processes, e.g., by automatic transmission and receipt of e-invoices and by the possibility of posting in accordance with a public standard chart of accounts in registered accounting systems
How should bookkeeping be organised and carried out?
Bookkeeping needs to be organised and carried out considering the complexity of your business, the number of transactions and the economic volume of transactions. This means that in practice, the way in which each company should keep its accounts can vary greatly.
Internal controls and procedures
In your organisation, you must therefore establish and continuously maintain a satisfactory and secure accounting environment. This means, among other things, that you must establish the internal controls and procedures necessary to ensure.
- You record all transactions accurately and as soon as possible after the facts giving rise to the records are known.
- The accounting records are not lost through deliberate or negligent acts.
- Security measures have been put in place to protect against, at a minimum, the destruction, disappearance, or corruption of records, as well as against error or misuse.
The organisation and performance of the accounting environment should consider the complexity of the business, the number of transactions, and the economic size of the transactions. However, there are also general requirements for the accounting environment that do not depend on the complexity of the organisation, the number of transactions, and the economic size of the transactions. The general requirements are:
- Accurate recording of transactions - also in foreign currency
- Securing the transaction and audit trail
- Correct and timely reconciliation
- Secure storage of accounting records for 5 years
Description of the accounting procedure
Is your company subject to accounting requirements under the Annual Accounts Act? Or has your company's net turnover for two consecutive income years exceeded DKK 300,000? Then you must prepare a description of your bookkeeping procedure.
The description must be kept together with your accounting material and not sent to the Danish Business Authority or any other authority.