Monday, January 26, 2026 - The Lagos State Internal Revenue Service has announced that it will enforce its statutory powers to recover unpaid taxes from defaulting taxpayers through third parties, including banks, employers, debtors, tenants and business partners.
This is contained in a public notice dated January 21, 2026,
and sighted by our correspondent on the LIRS website on Sunday.
According to the notice signed by the Executive Chairman of
LIRS, Mr Ayodele Subair, the state revenue service is empowered by Section 60
of the Nigeria Tax Administration Act, 2025, to direct any person holding money
on behalf of, or owing money to, a taxpayer who has failed to settle a final
tax liability to remit such funds.
The agency said the power of substitution applies to unpaid
Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax
administered by LIRS.
The notice read, “The Lagos State Internal Revenue Service
(LIRS) issues this public notice to inform the general public, particularly
employers, financial institutions, business operators and tax agents, of the
provisions of Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA
2025), relating to the power of substitution vested in the relevant tax
authority.
“The NTAA 2025 empowers the Lagos State Internal Revenue
Service to direct any person holding money on behalf of, or owing money to, a
taxpayer who has failed to pay an established final tax liability when due, to
remit such money to the Service in settlement (or partial settlement) of the
outstanding tax.
“The power of substitution is a lawful collection mechanism
designed to ensure efficient recovery of unpaid taxes, including Personal
Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax
(WHT) administered by LIRS.”
Clarifying the circumstances that may warrant such action,
the notice stated, “Where a taxpayer fails, neglects or refuses to settle any
established outstanding tax liability when due, LIRS may exercise its power
under Section 60 to direct any of the following persons to pay the amount owed
by the taxpayer.”
It said, “Banks and other financial institutions, employers,
tenants, debtors, customers, agents, business partners and any person owing
money to a defaulting taxpayer may be directed to pay such amounts directly to
LIRS.”
On the process, the notice stated that “once a substitution
notice is issued, the person served is statutorily required to remit to LIRS
the amount specified in the notice from funds belonging to, or payable to, the
defaulting taxpayer.”
LIRS explained that failure to comply with a substitution
directive constitutes an offence under the Act, adding that the tax liability
is deemed settled only to the extent of the amount remitted.
The Service said banks and financial institutions served
with substitution notices are required to remit the stated amount without
delay, confirm compliance via the LIRS e-Tax platform and provide information
on the taxpayer’s available balances where requested.
Employers, agents, tenants and other affected parties were
also directed to withhold the specified sums from funds due to the taxpayer and
remit same to LIRS within the period stated in the notice.
LIRS noted that any person who does not hold or owe money to
the taxpayer must notify the Service in writing within the stipulated period.
The notice further stated that affected parties may object
in writing to an assessment within 30 days of receiving a substitution notice,
in line with appeal provisions under the law.
While enforcement actions may be taken through substitution,
LIRS said defaulting taxpayers remain liable for any unpaid balance not
recovered and advised them to settle outstanding assessments promptly to avoid
penalties.
The notice warned that non-compliance with substitution
directives could attract liability equal to the tax amount specified,
additional penalties and interest, enforcement measures including distraint,
and possible prosecution.
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