The Lagos State Internal Revenue Service (LIRS) has announced plans to enforce its statutory powers to recover outstanding tax liabilities from defaulting taxpayers through third parties, including banks, employers, tenants, debtors and business partners.
The directive was contained in a public notice dated January 21, 2026, published on 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 (NTAA 2025) to recover unpaid taxes through a process known as substitution.
Under the law, LIRS may direct any person or institution holding money on behalf of, or owing money to, a taxpayer who has failed to settle a final tax liability to remit such funds directly to the Service.
The agency explained that the power of substitution applies to unpaid Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax (WHT) administered by LIRS.
“The Lagos State Internal Revenue Service 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, relating to the power of substitution vested in the relevant tax authority,” the notice stated.
It added that the mechanism is a lawful tax collection process designed to ensure the efficient recovery of unpaid taxes where a taxpayer fails, neglects or refuses to settle an established final tax liability when due.
LIRS clarified that affected third parties may include banks and other financial institutions, employers, tenants, customers, agents, business partners and any individual or entity owing money to a defaulting taxpayer.
The Service noted that once a substitution notice is issued, the recipient is legally required to remit the specified amount from funds belonging to or payable to the taxpayer. Failure to comply constitutes an offence under the Act, with the tax liability deemed settled only to the extent of the amount remitted.
Banks and financial institutions served with substitution notices are required to remit the stated amount without delay, confirm compliance through the LIRS e-Tax platform, and provide information on the taxpayer’s account balances where requested.
Employers, tenants, agents and other affected parties were similarly directed to withhold the specified sums from funds due to the taxpayer and remit them to LIRS within the period stated in the notice.
LIRS added that any person who does not hold or owe funds to the taxpayer must notify the Service in writing within the stipulated time.
The notice further stated that recipients of substitution notices may object in writing within 30 days, in line with the appeal provisions of the law.
While enforcement may be carried out through substitution, LIRS warned that defaulting taxpayers remain liable for any outstanding balance not recovered and advised them to settle their tax obligations promptly to avoid penalties.
The Service cautioned that non-compliance with substitution directives may attract liabilities equal to the tax amount specified, additional penalties and interest, enforcement actions including distraint, and possible prosecution.