The rules applying until now
Under the rules applying until now, enterprises that are subject to bookkeeping obligations shall, as a starting point, store their accounting records in Denmark. This also applies to electronic accounting records. Thus, as regards records in an electronic bookkeeping system, the servers on which the records are stored must, pursuant to the rules applying hitherto, as a starting point be located in Denmark.
There are, however, certain general exceptions to this requirement. Thus, subject to certain general requirements, there is a right to store the records in one of the other Nordic countries, and it is also, subject to certain requirements, allowed to keep abroad accounting records for the current and previous month as well as certain parts of the accounting records relating to the company's activities abroad.
Furthermore, under the rules applying until now, the Danish Business Authority may grant an exemption from the requirement to store accounting records in Denmark. Traditionally, the Business Authority has been very restrictive when it comes to granting exemptions. However, as the Business Authority has been overruled by the Company Appeals Board in several appeals concerning rejection of applications for exemption, a practice has developed over time according to which the Business Authority does grant exemptions if the application only concerns electronically stored accounting records and certain other requirements are met, including that there is direct on-line access from an address in Denmark to the electronic accounting records stored abroad.
The rules applying until now have been difficult to handle for many companies. In practice, the rules have made it necessary to obtain an exemption if a Danish subsidiary of a multi-national group wished to store its accounting records permanently in an electronic bookkeeping system located on servers with a parent company situated outside the Nordic countries, or if a company wished to apply a cloud-based system in which accounting records are stored on servers located outside the Nordic countries.
The new rules on electronically stored accounting records
On 22 January 2015, the Danish parliament adopted a bill amending the rules of the Bookkeeping Act on storage of accounting records. By way of the amendment, a general rule is introduced into the Bookkeeping Act whereby all accounting records (notwithstanding the form in which they are stored) must be stored in such a way that they may easily be made available to Danish public authorities that are entitled to claim insight into the accounting records according to other legislation. Further, a number of general requirements have been inserted regarding storage in electronic form of accounting records, irrespective of whether the storage takes place in Denmark or abroad. These requirements are that the enterprise being subject to the bookkeeping requirement:
- stores the accounting records in accordance with the requirements of the Bookkeeping Act (e.g. the requirements for registration, documentation and storage period);
- can, at any time, procure the records and provide access to them in Denmark (on-line access);
- stores any descriptions of the systems applied etc. and any necessary access codes etc. in Denmark; and
- ensures that the accounting records can be printed in hard copy (i.e. on paper or micro film in a readable form) or be made available in a recognised file format.
If these requirements (as well as the above general rule regarding storage of accounting records) are met, no exemption will, after the coming into force of the amendment, be required from the Business Authority in connection with the storage of electronic accounting records on servers located abroad. It is the responsibility of the enterprise being subject to the bookkeeping requirement to ensure that the requirements are met, and the Business Authority is not entitled to grant exemptions from the requirements. The requirements aim at reflecting the practice developed over time in relation to the exemption rule applying until now. However, the mere fact that businesses will, after the coming into force of the amendment, no longer have to apply for an exemption in order to store electronic accounting records abroad would seem to result in a considerable administrative relief for the companies.
The amendment only affects the rules of the Bookkeeping Act. If the accounting records contain personal data, the processing of such data must also take place in compliance with the rules of the Personal Data Act. It should be noted in this regard that the Personal Data Act contains special rules to be observed in order for personal data to be transferred to so-called third countries (countries outside the EU/EEA).
Hard-copy accounting records
As regards accounting records preserved in hard-copy form, the amendment of the Bookkeeping Act will not have any material implications. Thus, such accounting records must still, as a starting point, be stored in Denmark. As has been the case hitherto, an exception still applies prescribing that it is possible to store such accounting records in one of the other Nordic countries if the storage complies with the Bookkeeping Act and the company can at any time procure the records. Storage outside the Nordic countries is still only possible under the limited exceptions concerning storage of accounting records for the current and previous month and accounting records relating to foreign activities. In the future, the exceptions will only apply to hard-copy material, as all storage of accounting records kept in electronic form must take place under the rules described briefly above.
As is the case with electronically stored accounting records, it will no longer be possible to apply for an exemption from the rules as regards accounting records stored in hard-copy form. However, this does not make any actual difference as the Business Authority has in practice only granted exemptions with regard to electronically stored accounting records.
Modernization of the requirements as to form concerning disclosure of accounting records
According to the rules applying until now, a public authority entitled to request insight into accounting records may demand that the records are printed in hard copy free of charge. This rule will be modernized with the result that it is no longer required that disclosure should always take place in the form of hard-copy prints. As regards electronically stored accounting records, the Bookkeeping Act specifically mentions, after the amendment, that the authority may demand that the records are disclosed in an electronic format or sent digitally to the authority.
New linguistic rules
According to the rules applying until now, the authorities may, if accounting records other than external vouchers (in Danish, "eksterne bilag") are prepared in other languages than Danish, demand that they are translated into Danish free of charge. The amendment will modify this requirement with the result that the said rule only applies to accounting records prepared in other languages than Danish and English, just as translations covered by the rule do not have to be in Danish in the future, but may be in English.
The amendments will take effect on 1 March 2015
The amendments to the Bookkeeping Act will take effect on 1 March 2015. The rules will then apply not only to any new accounting records, but also to electronic accounting records from before 1 March 2015.