iDeemlawfulThe Lagos State Internal Revenue Service has announced plans to activate its statutory authority to recover unpaid taxes from defaulting taxpayers through third parties such as banks, employers, debtors, tenants and business partners.
This was disclosed in a public notice dated January 21, 2026, obtained from the LIRS website on Sunday.
According to the notice signed by the Executive Chairman of LIRS, Mr Ayodele Subair, the agency is empowered under Section 60 of the Nigeria Tax Administration Act, 2025, to mandate any person holding funds on behalf of, or indebted to, a taxpayer who has failed to settle a final tax obligation to remit such monies.
LIRS stated that the substitution power applies to outstanding Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax under its administration.
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The notice stated, “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.”
Explaining when such action may be triggered, the notice added, “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 continued, “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 procedure, 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 clarified that failure to comply with a substitution directive constitutes an offence under the Act, noting that a tax liability is considered discharged only to the extent of the amount remitted.
The Service explained that banks and financial institutions served with substitution notices must remit the stated sums without delay, confirm compliance through the LIRS e-Tax platform and, where required, provide information on the taxpayer’s available balances.
Employers, agents, tenants and other affected parties were also instructed to deduct the specified amounts from funds due to the taxpayer and remit same to LIRS within the timeframe stated in the notice.
LIRS further noted that any person who neither holds nor owes money to the taxpayer must notify the Service in writing within the stipulated period.
The notice also stated that affected parties may submit written objections to an assessment within 30 days of receiving a substitution notice, in line with the appeal provisions of the law.
While substitution may be used as an enforcement tool, LIRS said defaulting taxpayers remain responsible for any outstanding balances not recovered and urged them to promptly settle unpaid assessments to avoid sanctions.
The Service warned that failure to comply with substitution directives could result in liability equal to the tax amount specified, additional penalties and interest, enforcement actions including distraint, and possible prosecution.