Under Danish law, accounting records must normally be retained in Denmark. However, this may be very impractical for international groups of companies, and Danish companies and branches may therefore apply for permission to retain accounting records outside of Denmark. So far, permission has only rarely been granted, but several recent decisions mark a change of practice, granting permission to retain accounting records outside of Denmark.
Denmark or 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 description 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 these 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.
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 company or branch - usually the management - and on the company/branch itself. In severe matters, the management in principle risks imprisonment for up to 1 year and 6 months.
Permanent retention outside the Nordic countries
However, it is possible to retain accounting records 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 store accounting records with the foreign head office or parent company or a shared service centre.
Until recently, such permission was rarely granted, but in several recent decisions the Danish Business Appeals Board has overruled the Business Authority and granted permission.
Appeals Board practice shows that permission should usually be granted if (i) substantial economic disadvantages are related to retaining the records in Denmark; (ii) the Danish authorities have direct online access to the accounting material; and (iii) vouchers are retained in Denmark/the Nordic countries. In one case, permission seems to be granted even though not all vouchers where retained in one of the Nordic countries.
Permission has been granted with respect to several countries,
- The United States
Presumably, permission may also be granted with respect to other countries within the European Union.
Apply for permission
Considering the administrative and economic 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 from the Danish Business Authority to retain accounting records outside of Denmark or the Nordic countries, including re-applying if permission has previously been denied.