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 the 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.
