Accounting Denmark: Best Practices for Startups and Small Businesses

Denmark is considered one of the most innovative countries in Europe and a thriving hub for startups and tech companies. If you're launching a business here, understanding the local accounting landscape is critical. In this guide, we explore how accounting in Denmark works for small businesses—from first invoices to annual reports.

Starting a Business in Denmark: Accounting From Day One

Accounting in Denmark is more than just an annual formality—it’s a tool that helps you build a stable, compliant, and profitable company.

When starting a business in Denmark, here’s what you must do early on:

• Register your company and obtain a CVR number
• Choose the right business structure (ApS, sole trader, etc.)
• Open a dedicated business bank account
• Implement an accounting system or hire a local accountant
• Register for VAT (Moms) if needed

Even if you don’t have clients yet, bookkeeping should begin immediately. All expenses (software, marketing, hardware) must be properly tracked.

Choosing the Right Business Structure

The type of business entity you choose affects your accounting responsibilities.

ApS (Anpartsselskab) – Private Limited Company

• Most common for startups
• Requires minimum DKK 40,000 capital
• Must file annual financial reports
• Eligible for corporate tax benefits and grants

Sole Proprietorship (Enkeltmandsvirksomhed)

• Easy to set up
• No capital requirement
• Profits taxed as personal income
• Less paperwork, but fewer legal protections

Startups looking to scale often prefer ApS due to investor expectations and access to R&D credits.

Bookkeeping Requirements for Small Businesses

Denmark mandates double-entry bookkeeping and structured documentation—even for microenterprises.

Key elements of proper bookkeeping:

• Sales invoices (with customer info, VAT, itemization)
• Purchase receipts and supplier invoices
• Bank statements reconciled with expenses
• Payroll documentation
• VAT accounting records

Digital bookkeeping is encouraged and often required, especially for VAT-registered businesses.

You must store financial records for 5 years, digitally or in physical form.

Accounting Software for Danish Startups

Using accounting software is highly recommended for new businesses. The most popular Danish tools offer integrations with the tax office (SKAT) and banks.

Top software options:

• Dinero – User-friendly, ideal for freelancers and sole proprietors
• Billy – Focused on startups and entrepreneurs
• e-conomic – Scalable for growing businesses and accountants
• ErhvervsKontolink – Designed to automate reconciliation with Danish banks

These platforms support invoice creation, VAT returns, payroll, and expense management—all in compliance with Danish law.

Taxation and VAT for Small Businesses

Understanding the Danish tax system is essential for accurate accounting. As a small business, you’ll deal with:

1. Corporate Income Tax

• Flat 22% tax on company profits
• Tax returns must be filed annually
• Deductions for R&D, startup losses, and some investments

2. VAT (Moms)

• Standard rate: 25%
• VAT registration required if turnover exceeds DKK 50,000 annually
• Monthly or quarterly returns filed online

3. Payroll and Employment Taxes

If hiring employees, you must:

• Register as an employer with SKAT
• Withhold and report A-skat and AM-bidrag
• Pay ATP contributions and holiday allowances

Even if you work alone, you’ll still need to handle your personal tax and pension contributions.

Annual Reporting and Auditing

Not all startups are required to undergo a financial audit—but all ApS companies must submit an annual report to the Danish Business Authority (Erhvervsstyrelsen).

Reporting includes:

• Income statement
• Balance sheet
• Notes (disclosures and explanations)
• Management commentary (for larger entities)

Audit requirements apply if the company exceeds:

• DKK 5.6 million in turnover
• DKK 3 million in assets
• 12 employees

Startups under these thresholds can file unaudited simplified reports, but they still need to be submitted accurately and on time.

Accounting Tips for Startup Success in Denmark

Here are proven tips to help startups stay on top of their accounting:

Separate Business and Personal Finances

Always use a dedicated bank account for business transactions. This simplifies bookkeeping and avoids tax complications.

Automate Early

Use cloud-based software that syncs with your bank, generates invoices, and tracks expenses. This saves hours of admin time each month.

Track Cash Flow

Cash flow—not just profit—keeps your startup alive. Build a cash flow forecast and monitor it monthly to anticipate funding needs.

Prepare for Grants and Funding

Most Danish grants and investment programs require financial statements. Keeping your books in order increases your chances of approval.

Work With a Local Accountant

Even if you use software, a certified accountant can help with:

• Tax optimization
• Compliance
• Annual reporting
• Strategic financial advice

Common Mistakes to Avoid

New business owners often make the same accounting errors, including:

• Mixing personal and business expenses
• Ignoring VAT registration deadlines
• Missing tax payment dates
• Underestimating payroll complexity
• Not backing up digital records

Each of these mistakes can result in fines, missed deductions, or legal complications.

Deadlines for Danish Startups

Here are key accounting-related deadlines to mark in your calendar:

Being late can trigger late fees, audits, or registration warnings.

Whether you're launching your first ApS, working as a solo founder, or hiring your first employees, make accounting in Denmark one of your early priorities. It will pay off in efficiency, confidence, and strategic clarity.