Why Lagos Will Recover Unpaid Taxes Through Banks, Employers, Business Partners – LIRS

The Lagos State Internal Revenue Service (LIRS) has announced plans to begin its enforcement of statutory powers to recover unpaid taxes from defaulting taxpayers through third parties, including banks, employers, debtors, tenants and business partners.

In a public notice dated January 21, 2026, and cited by TVC News from the official LIRS website on Sunday, the revenue agency disclosed that it is empowered by the provisions of the 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.

According to the notice e-signed by the Executive Chairman of LIRS, Mr Ayodele Subair, the state revenue service revealed that 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 further explained that failure to comply with a substitution directive constitutes an offence under the Act, adding that the tax liability is deemed paid to the extent of the remittance made pursuant to the substitution

The Service said that upon receipt of a substitution notice, all banks and financial institutions are required to remit the stated amount to LIRS without delay, provide confirmation of compliance through the LIRS e-Tax platform and report the taxpayer’s available balances and any encumbrances as may be 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.