What Documents Do You Need for an IRD Audit? Finzdox Accounting Assistance Service in Sri Lanka

If the Inland Revenue Department selects your return for audit, you need records that substantiate the income, deductions and tax credits you reported. Audits are conducted under the Inland Revenue Act No. 24 of 2017, as amended by Act No. 2 of 2025 and Act No. 11 of 2026.

Here is what to prepare.

The Core Document Set You Need for an IRD Audit

Income

• Sales invoices and receipts issued
• Bank statements for all accounts, including any personal account used for business
• Contracts and customer agreements
• For export or foreign-currency income: invoices plus bank evidence of the remittance into Sri Lanka

Expenses and deductions

• Purchase invoices and expense receipts showing supplier, date and business purpose
• Rent agreements and receipts, utility bills, professional fee invoices
• Records distinguishing capital from revenue expenditure

Payroll

• Payroll registers, APIT deduction records and the APIT certificates issued to employees
• EPF and ETF returns with payment receipts
• Employment contracts, plus the valuation basis for any non-cash benefits such as vehicles or accommodation

Indirect tax and withholding

• VAT returns, tax invoices issued and received, and SVAT documentation where applicable
• SSCL returns and liable turnover computations
• WHT/AIT certificates received and issued, and payment confirmations with DIN references

Assets

• Fixed asset register, purchase invoices, capital allowance computations
• Disposal records, lease, and hire purchase agreements
• Loan agreements with year-end interest certificates

Entity and filing records

• Certificate of Incorporation, Articles of Association, Business Registration certificate
• TIN certificate and VAT/SSCL registration certificates
• Audited financial statements
• Returns as filed, with RAMIS acknowledgements
• Transfer pricing disclosures where you transact with associated enterprises

Three Things Worth Knowing Before You Respond

Entertainment expenditure is not deductible. It is specifically disallowed under the Act. Submitting entertainment receipts as deduction support invites a disallowance rather than preventing one.

The burden of proof is on you. Section 141 places it on the taxpayer, and the Tax Appeals Commission Act does the same at the appeal stage. There is no rule requiring the IRD to accept estimates where records are missing. Undocumented deductions are generally lost deductions.

Cash payments of Rs 500,000 or more are now restricted. Act No. 11 of 2026 requires approved payment methods: account-payee cheque, bank draft, card, electronic transfer, or direct deposit. Large cash settlements attract scrutiny.

Record Retention

The Act requires records supporting your returns to be maintained and produced to the Commissioner-General on request. Five years is the period generally applied in practice, running from the year of assessment rather than your filing date.

Keep some records for longer, regardless: anything establishing the cost base of an asset you still hold, property deeds, share acquisitions, fixed asset purchases, plus company formation documents and records for any year still under assessment or appeal. If you cannot prove what you paid for an asset, you cannot prove your gain when you sell it.

If You Disagree With an Assessment

The Act sets out a defined route, with strict deadlines:

1. Administrative review (section 139) is a written request to the Commissioner-General.
2. Appeal to the Tax Appeals Commission (section 140),  available within 30 days of the Commissioner-General’s decision, or once 90 days have passed since your review request without a decision. Lodging an appeal generally requires a deposit or bank guarantee against the assessed sum.
3. Appeal to the Court of Appeal on a question of law.

One point that catches taxpayers out: under section 142, an appeal does not suspend the collection of the tax. Filing an appeal does not pause your liability, so plan the cash flow accordingly.

Common Audit Problems

• Incomplete records are the single most frequent cause of a poor outcome
• Personal and business funds are mixed in one account, which brings the whole account into scope
• Non-cash employee benefits are undervalued
• Foreign-currency income claimed at the 15% concessionary rate without bank evidence of remittance
• Missed deadlines at the review or appeal stage