Regulatory updates - Denmark

As previously reported by Pagero in an earlier update, Denmark is mandating the use of digital bookkeeping systems (DBS). There are two categories of DBS in Denmark: standard and custom (also known as specially developed).

The requirements for the standard DBS have been known for quite some time, such as stricter IT security and e-invoicing capabilities, and many accounting software providers have already been registered with ERST.

For the custom DBS, the requirements have just been released and are practically identical to the requirements of the standard systems. However, unlike the standard DBS, where the responsibility of fulfilling the requirements falls on the provider of the system, it will be up to the company using the custom DBS to ensure the requirements are met.

Danish companies using an accounting system classified as a custom DBS should start preparing for the obligation that will enter into force on 1 January 2025.

With the introduction of the Danish Bookkeeping Act back in July 2022, a lot of new requirements have been pending implementation, such as the obligatory usage of Digital Bookkeeping Systems (DBS) for companies in Denmark.

Besides having heftier requirements regarding IT security and support for bookkeeping functionalities, these systems must have the capability to issue, receive and store e-invoices. This also includes having a connection to Peppol and Nemhandel as well as support for various application responses.

There will be two types of DBS systems in Denmark, standard and custom.

The former is a DBS that has been registered with the Danish Business Authority (Erhvervsstyrelsen or ERST) and is considered a standardized and compliant choice of DBS. Providers of standard DBS must be registered by 1 January 2024 to operate in Denmark.

The latter is a DBS that is specially tailored to the conditions of a company. These types of DBS do not have to be reported to ERST. Companies in Denmark are going to have to use either of these in the future. The requirements and timelines for custom DBS will be released sometime during 2023.

Timeline:

• 1 July 2024: Companies with an obligation to submit an annual report according to the Annual Accounts Act, and which use a standard DBS, must book digitally from the next new accounting period*.
• 1 January 2025: Companies with an obligation to submit an annual report according to the Annual Accounts Act, and which use a custom DBS, must book digitally from the next new accounting period.
• 2026: Personally owned companies, where the net business turnover in each of the two most recent income years was more than DKK 300,000 (approx. EUR 40,000) must book digitally. The obligation starts on the first accounting period following the implementation date. The date is still subject to change but will follow the same rules as above starting sometime in 2026.

*e.g. if the accounting period is 1 January – 31 December 2024, the obligation starts 1 January 2025.

As previously reported by Pagero, Denmark is in the progress of implementing a new Bookkeeping law that includes stricter requirements on providers of accounting software. One of the pillars of these new requirements is the mandatory capabilities for accounting software to issue, receive, process, and archive electronic invoices. This change puts e-invoicing in a position to become the de facto new norm for B2B invoicing in Denmark.

The Danish Business Authority (Erhvervsstyrelsen or ERST) announced on 13 December 2022 that a number of new digital bookkeeping rules are being postponed due to awaiting approval by the new Danish Government which is yet to be formed.

ERST will release a new timeline and guidance on the new digital requirements after the new government takes office.

Stay tuned with Pagero for the latest news about e-invoicing in Denmark.

On 15 May 2022, Denmark made updates to the OIOUBL version 2.1 and Schematrons version 1.12. The functionality to use digital sustainability labels and other product certificates is now in effect. This provides an additional opportunity for companies to showcase the sale of sustainability-labeled products.

From the perspective of both public and private purchasers, this also provides useful data used to measure whether they meet internal and/or external targets regarding the purchase of sustainable products.

The update also addressed several minor and major bugs with the previous version of the OIOUBL Schematrons, as well as ensuring support for UBL 2.1. This makes certain that the new OIOUBL standard converges with current Peppol document standards.

The new Danish Bookkeeping Act brings many novelties, of which the most significant is the requirement to issue, exchange, receive, process and archive invoices electronically. At the same time, software providers of corresponding services should register themselves with the Danish Business Authority or ERST (Dan.: Erhvervsstyrelsen) and obtain the status of a "digital bookkeeping system".

Who is covered by the digital rules of the new Bookkeeping Act?

All companies, regardless of size, are obliged to submit an annual report to ERST and fall within the scope of application of the new requirements.

In addition, other companies subject to bookkeeping, incl. sole proprietors, associations, branches, etc., that are not obliged to submit an annual report to ERST but have a turnover DKK > 300 000 (ca. EUR 40 500,00) during two consecutive years are covered by these rules.

Further clarifications of the scope

The new Bookkeeping Act does not change who is subject to the bookkeeping obligation. If your company is covered by the current Bookkeeping Act (before 1 July 2022), you will also be liable to post according to the new Bookkeeping Act after 1 July 2022.

This means that all commercial companies in Denmark, regardless of ownership or liability, are subject to the bookkeeping obligation. Moreover, Danish branches or permanent establishments of foreign companies are also included.

The Act does not apply to the Faroe Islands and Greenland.

What are the implementation timelines?

The new Bookkeeping Act enters into force on 1 July 2022. However, the digital obligations will start applying at a later point in time, depending on the size of the company:

• 1 January 2024: companies obliged to submit annual reports to ERST (class B, C, D)

Those using in-house developed bookkeeping software will have to comply starting 1 July 2024;

• 1 January 2026: companies not obliged to submit annual reports to ERST but having turnover DKK > 300 000 during two consecutive years (class A)

Entities using in-house bookkeeping software will have to comply starting 1 July 2026.

What are the digital bookkeeping systems?

ERST will, during 2022, but not later than January 2023, establish requirements and specifications for the software providers to become classified as "digital bookkeeping systems".

What requirements apply to e-invoicing and CTC?

No specifications have been published at this point, but we expect details to be clarified by ERST once they have established requirements for the digital bookkeeping systems. With that said, Denmark is expected to leverage the existing infrastructures of Peppol and/or Nemhandel.

Moreover, under the new Bookkeeping Act, ERTS and the Danish tax administration are given the right to introduce the CTC/e-reporting requirement atop the mandatory e-invoicing schema.

EU derogation

What is unclear at this point is whether this obligation, as designed, will require Denmark to apply for a derogation (from the VAT Directive) by the European Commission or whether they have already discussed this new framework at the EU level.

Pagero closely follows the developments in Denmark and remains ready to support businesses and software providers with the upcoming obligations in the country and outside. We have been operational in Denmark since many years, offering VAT, e-invoicing and e-archiving compliance, connectivity to Nemhandel, and fulfilling the local Peppol requirements.

As we reported earlier, the Danish government planned to oblige public administrations to make part of their purchases electronically by creating e-orders from e-catalogues for certain categories of goods and services by 2023.

On 14 September 2021, the Danish Ministry of Finance announced that the mandate would not enter into force as intended.

However, it will still be mandatory for some state institutions to use e-orders and e-catalogues as part of purchasing agreements in the Government Procurement Program.

Denmark has long-term plans of enhancing the buying and selling process for businesses towards public authorities through their involvement with Peppol. Denmark is taking the next step in digitalising the purchasing process by rolling out the mandatory use of electronic catalogs (e-catalogs) and electronic orders (e-orders) through the Peppol Network.

From 1 January 2023, public administrations will be required to make part of their purchases electronically, by creating e-orders via e-catalogs, for certain categories of goods and services. The requirements for e-catalogues and e-orders will comply with and be based on the Peppol standard. This means that suppliers will have to be able to receive these document types electronically via an accredited Peppol Service Provider.

E-documents are to be sent through the NemHandel platform. Nemhandel began integration with the Peppol network in 2017. Peppol is an open network which makes e-procurement between suppliers of goods and services and public authorities easy, efficient and secure.

Since 18 April 2020, Danish public authorities have been able to receive Peppol e-invoices via the Peppol Network. All public authorities must be affiliated with the Peppol Network via Nemhandel’s Business Register. Peppol-based e-catalogues and e-orders will be mandatory for public entities from 2023.

Suppliers must be able to receive e-orders and have e-catalogs on the covered purchasing categories. The purchasing categories are already e-commerce mature. Once suppliers have received an e-order, they can convert it to an e-Invoice. Order placement and invoicing will take place electronically and automatically without the need for manual intervention. This will lead to a more efficient process with a higher degree of automation, reducing errors, costs and burdens for both the public authorities and businesses.