The Lagos State Internal Revenue Service (LIRS) has announced plans to enforce its legal powers to recover outstanding taxes from defaulting taxpayers by involving third parties such as banks, employers, tenants, debtors and business partners.
In a public notice dated January 21, 2026, and published on its website, LIRS said the action is backed by Section 60 of the Nigeria Tax Administration Act (NTAA) 2025. The notice was signed by the Executive Chairman of LIRS, Ayodele Subair.
According to the agency, the law empowers tax authorities to direct any individual or organisation holding funds on behalf of, or owing money to, a taxpayer with a confirmed and unpaid tax liability to remit such funds directly to the Service.
LIRS explained that the power of substitution applies to taxes under its administration, including Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax.
The Service stated that where a taxpayer fails or refuses to settle an established tax liability when due, it may issue substitution notices to banks and other financial institutions, employers, tenants, customers, agents, debtors and business partners, instructing them to pay amounts owed to the taxpayer directly to LIRS.
It added that once a substitution notice is served, the recipient is legally required to remit the specified sum from funds belonging to or payable to the defaulting taxpayer. Any failure to comply constitutes an offence under the Act.
LIRS noted that banks and financial institutions must remit the stated amount without delay, confirm compliance through the LIRS e-Tax platform and, where requested, provide information on the taxpayer’s account balances. Employers, tenants, agents and other parties are similarly required to deduct and remit the specified sums within the period stated in the notice.
The Service also clarified that individuals or organisations that do not hold or owe funds to the taxpayer must notify LIRS in writing within the stipulated timeframe.
Affected parties were reminded of their right to object to an assessment within 30 days of receiving a substitution notice, in line with the appeal provisions of the law.
While noting that substitution is a lawful recovery mechanism, LIRS warned that defaulting taxpayers would remain liable for any unpaid balance not recovered. The agency advised taxpayers to settle outstanding liabilities promptly to avoid penalties.
It further cautioned that failure to comply with substitution directives could result in liability equal to the tax amount specified, additional penalties and interest, enforcement actions such as distraint, and possible prosecution.
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