Under Danish law, accounting records must generally be retained in Denmark. Obviously this can be very impractical for international groups of companies, and Danish companies and branches may therefore want to apply for permission to retain accounting records outside of Denmark. Danish practice for granting such permission is becoming still more liberal, and recent developments suggest that all accounting records except physical vouchers, system descriptions and passwords may be retained abroad.

Retention in Denmark and the Nordic countries

Under the Danish Bookkeeping Act, accounting records must in general be retained in Denmark. However, accounting records may also be retained in the Nordic countries (Finland, Iceland, Norway or Sweden) provided that: (a) the accounting records are retained in accordance with the Danish Bookkeeping Act; (b) it is possible to retrieve the records at any time; and (c) any descriptions of systems etc. and passwords are retained in Denmark in order to enable public authorities to access the accounting records at any time.

Accounting records may be retained in other countries for a period of 1-2 months. If an enterprise carries out activities abroad, accounting records in respect of those activities can be retained abroad for a 3-4 months' period. However, internal and external vouchers for the foreign activities may be retained abroad for the entire retention period of 5 years.

Sanctions in case of non-compliance

Non-compliance with the rules may be sanctioned with fines. Fines may be imposed on the person(s) in charge of the accounting of the enterprise - usually the management - and on the enterprise itself. If the non-compliance is gross or intentional it may be punished under the Danish Criminal Code and may in severe matters lead to prison for up to 1 year and 6 months for the company's management.

Furthermore, the enterprise may be disqualified from retaining accounting records abroad for a period of 1 to 5 years. 

Permanent retention outside the Nordic countries

Accounting records may be retained permanently outside the Nordic countries if permission is obtained from the Danish Business Authority.  

Such permission is particularly relevant for foreign companies with Danish permanent establishments or subsidiaries wishing to retain accounting records at the foreign head office or parent company or a shared service centre. 

Earlier, such permission was rarely granted by the Danish Business Authority. However, several decisions of the Danish Business Authority have been appealed to the Danish Business Appeals Board. The result has been a more liberal practice for granting permission to retain accounting records outside the Nordic countries. Thus, according to new practice, all accounting records, except system descriptions, passwords, and physical vouchers if such exist, can be retained abroad, provided of course application has been made and permission has been granted.    

According to Appeals Board practice, permission will usually be granted in the following circumstances:

Cases where permission is granted

  • The enterprise is part of an international group. 
  • Retention of accounting records abroad will entail considerable cost savings. 
  • There is no reason to assume that a dispensation will be abused in detrimental to the Danish tax and investigation authorities (this presupposes that there are no tax or investigation cases in progress in relation to the enterprise).
  • The enterprise agrees to comply with terms and conditions decided by the Business Authority. 

In cases where the described circumstances applied, the Appeals Board remitted the cases to the Business Authority for them to decide the terms and conditions for the permission.

In the remitted cases the Business Authority required that copies of all vouchers should be retained in Denmark. However, on behalf of two complainants, the Appeals Board determined that permission should not be conditioned on the retaining of copies of electronic vouchers in Denmark. Based on Appeals Board practice, permission to retain accounting records abroad may be granted on the following terms and conditions: 

Terms & conditions usually stipulated for retention abroad

  • Accounting records retained abroad must be retained in accordance with the Danish Bookkeeping Act.
  • Descriptions of systems and necessary passwords must be retained in Denmark. 
  • Physical vouchers must be retained in Denmark.
  • It must be possible to print the accounting records from the enterprise's address in Denmark (through online connection to the server abroad).
  • The enterprise must warrant that Danish authorities through online access from the enterprise's address in Denmark are able to print out accounting records retained abroad at any time without the abroad authorities demanding a court order.

Permission to retain accounting records abroad will often be limited in time to expire three years after the date of grant. If the enterprise wants to continue retaining accounting records abroad, a new application must be submitted (usually a month before expiry of the current permission).

As described, it will be a condition for the grant of permission that the accounting records retained abroad are retained in accordance with the Danish Bookkeeping Act. This means that: 

Retention in accordance with the Danish Bookkeeping Act

  • Bookkeeping procedures must be planned and carried out in accordance with good bookkeeping practice.
  • All transactions must be entered accurately having regard to the nature and size of the enterprise.
  • All entries must be traceable to the financial statements or other statements.
  • All entries must be documented by vouchers.
  • Accounting records must be retained appropriately for 5 years from the end of the relevant financial year.
  • Accounting records must be retained in such a way that it is possible independently and precisely to retrieve the relevant accounting records during the entire retention period. 
  • If the accounting records are retained in electronic form, on microfilm or the like, it must at any time be possible to print them in hard copy without any processing.
  • The description of the systems used to retrieve and print the accounting records in hard copy must be retained in hard copy.

Transfer of accounting records - Processing of data

In the event of a transfer of accounting records to countries which are not members of the European Union and have not entered into an agreement containing rules corresponding to the Directive on Protection of Individuals with regard to the processing of personal data and the free movement of such data, special rules in the Danish Act on Processing of Data have to be complied with. Currently, Iceland and Norway have entered into agreements containing rules corresponding to the Directive.

Applying for permission

Considering the administrative and commercial advantages of concentrating an international group's bookkeeping and accounting records in one place, groups with branches or subsidiaries in Denmark should consider applying for permission to retain accounting records abroad.

Taking into account that a large part of accounting records are today retained electronically, permission in accordance with the most recent practice may entail significant reductions of the administrative and economical resources.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.