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After pioneering in B2G e-invoicing in 2005, Denmark is threading further into the waters of digitalization and financial monitoring with the Danish Bookkeeping Act (Lov om bogføring, Act no. 700) of 2022. Covering a wealth of requirements on digital systems, the Act will be affecting the majority of Danish resident enterprises and permanent establishments over time. The goal is to improve efficiency, reduce fraud, and strengthen e-commerce.
But what exactly will be covered under the Danish Bookkeeping Act, who will be affected, what deadlines will need to be met, and how can your SAP system be brought up to speed with past, present and future Danish requirements? This blog has got you covered.
What is the Danish Bookkeeping Act?
Published in 2022, the Danish Bookkeeping Act provides a framework of requirements that the Digital Bookkeeping Systems (DBS) of all businesses in Denmark must adhere to. In short, Danish businesses that are subject to the Bookkeeping Act, are left with two options: they can implement either certified digital bookkeeping software approved by the Danish Business Authority (Erhvervsstyrelsen) or a custom solution that complies with the act’s standards. These standards are trifold:
- The system must support the electronicrecording and storing of the company’s ongoing transactions. Transactions must be recorded accurately and as soon as possible, while allowing relevant documents to be attached to each entry. Archiving requirements of five years apply (counting from the end of the financial year in which the transactions took place).
- The system must ensure appropriate cybersecurity measures (e.g. user and access management, weekly automatic backups).
- The system should facilitate the automation of administrative processes, support the exchange of the company’s bookkeeping data via a SAF-T report, and allow for e-invoicing. Standardized accounting in accordance with the public chart of accounts must be enabled. The system should also incorporate bank reconciliation and difference control.
The list of digital bookkeeping systems approved by the Danish Business Authority can be found here: Registered bookkeeping systems. Users of custom accounting software must be able to provide documentation that describes the manner in which their solution meets the abovementioned requirements upon request.
A violation of the Danish Bookkeeping Act can result in both a fine (of up to DKK 1.5 million, or €201,145.50) and a qualified opinion in the annual report.
In depth: SAF-T and e-Invoicing
As indicated above, the Danish Bookkeeping Act also comments on SAF-T and e-Invoicing requirements in Denmark.
SAF-T is an international standard for digital record-keeping and tax compliance, in line with the OECD framework. From 2025 onwards, Danish businesses must be able to generate and extract a SAF-T file from their DBS upon request of the Danish Tax Agency (SKAT, e.g. in context of a tax inspection). The reporting must only be done on-demand – there are so far no requirements for companies to submit SAF-T files to the authorities on a regular basis. The main SAF-T report introduced by Denmark is called the SAF-T Financial report, which includes information on a business‘ general ledger, customer and supplier records in XML format. At this point in time, only the Header section of the SAF-T Financial report is a mandatory component of the legal requirement, while the generation of the remainder of the SAF-T Financial report is considered optional. The remainder of the format will nevertheless also become compulsory at a later stage. Aside from the SAF-T Financial report, a second SAF-T Cash Register report, containing journal data from electronic cash register systems (sales transactions, payments, discounts…) can be requested exclusively from Danish businesses using electronic cash register systems.
In addition to generating SAF-T files, companies will also be mandated to adopt a DBS that can issue, receive and store electronic invoices in the Danish OIOUBL 3 or EU Peppol BIS 3.0 format. Those e-invoices should be exchanged via either the local NemHandel platform or the PEPPOL network. The businesses concerned are not yet obliged to actively use e-invoices in B2B transactions, but their digital bookkeeping system must be qualified to do so, and partners can decide to introduce electronic invoicing on a voluntary basis. It is nevertheless very likely that the imposition of the Bookkeeping Act is a precursor to a future B2B e-invoicing (and possibly B2C e-invoicing) mandate. E-invoicing through the NemHandel or Peppol platforms has already been a mandatory requirement for B2G public procurement transactions since 2005.
Who is affected by the Bookkeeping Act?
Danish resident businesses are considered under the 2022 Danish Bookkeeping Act, as well as permanent establishments of foreign companies.
If the business uses a DBS certified by the Danish Business Authority, the provider of the digital bookkeeping system is responsible for ensuring compliance. However, if a company adopts a so-called custom DBS (read: a DBS that is not on the list of the Danish Business Authority), the company itself is responsible for ensuring adherence to the Bookkeeping Act.
Which deadlines apply?
To provide businesses with sufficient time to adapt, the implementation of the Bookkeeping Act will follow a staged roll-out, spread across three main phases based on company size and the type of DBS used.
- By July 2024, medium and large companies using a registered bookkeeping system (accounting software on the approved list of the Danish Business Authority) will be required to comply with the Danish Bookkeeping Act. Medium and large companies, are those who are obliged to submit an annual report (annual Erhvervsstyrelsen) according to the Danish Financial Statements Act. The obligation to book digitally starts from the new financial year.
- By January 2025, medium and large companies using a non-registered bookkeeping system (custom accounting software), must post digitally from the first day of their a new financial year. They also need to be able to generate SAF-T format data on the tax authority´s request.
- From 2026 onwards, also small companies with an annual net turnover of over DKK 300,000 (approximately €40,300) in two consecutive years (e.g. 2024 and 2025), must adhere to the Danish Bookkeeping Act. For small companies using a registered bookkeeping system, a deadline starting January 2026 applies, for small companies with custom accounting software, a deadline starting July 2026 applies.
Compliance with the Danish Bookkeeping Act using SAP
Based on the latest information provided by SAP, SAP has decided not to apply for any of their products (S/4HANA Cloud, S/4HANA On-premise, SAP Enterprise (ECC) or SAP ByDesign) to be on the list of registered standard digital bookkeeping systems of the Danish Business Authority.
They will nevertheless strive to be compliant with all requirements for non-registered bookkeeping systems. For example, the requirement to send and receive e-invoices via NemHandel in OIOUBL format is planned to be covered under SAP’s DRC (Document and Reporting Compliance) Cloud Edition solution by June 30th, 2025 (S/4HANA and ECC). SAP DRC is an integrated SAP solution which strives for long-term end-to-end compliance with various country-specific legal requirements all over the world. E-invoicing in Denmark through the Peppol Network is currently already supported under the same license.
The generation and extraction of the SAF-T Finance format is already covered by SAP as well. The current SAP solution nevertheless only foresees the mandatory “Header” element of the SAF-T report (the other elements, “MasterFiles”, “GeneralLedgerEntries”, and “SourceDocuments”, will be delivered by SAP once they become mandatory as well, and once detailed specifications are published by the Danish government). The Cash Register SAF-T file is not supported by SAP.
Why choose PIKON as your partner in your Compliance Project?
Here at PIKON, we combine SAP expertise with in-depth knowledge of the (upcoming) legal requirements. With our extensive experience from numerous projects, we are dedicated to supporting you every step of the way as you navigate both current and future changes. We are there help you and your team with a strategic roadmap to digital transformation and compliance with country-specific legal requirements. Read more about our service for E-Invoicing and Tax Reporting.
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If you have any questions, or if you would like to discuss how PIKON can help you with your business case, do not hesitate to leave a comment below or to request a web-meeting. I am happy to help you!
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