The Lagos State Internal Revenue Service (LIRS) has announced plans to intensify the recovery of outstanding taxes by deducting unpaid liabilities directly through third parties such as banks, employers, tenants, debtors, and business partners of defaulting taxpayers.
The move was disclosed in a public notice dated January 21, 2026, and published on the official LIRS website. The notice was signed by the Executive Chairman of the Service, Mr. Ayodele Subair.
According to LIRS, the enforcement is backed by Section 60 of the Nigeria Tax Administration Act (NTAA) 2025, which grants tax authorities the legal power to recover established tax liabilities from third parties holding or owing funds to a taxpayer who has failed to pay after final assessment.
Scope of the Policy:
LIRS clarified that the “power of substitution,” as provided under the Act, applies to several categories of taxes administered by the agency. These include Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT).
Under the provision, once a taxpayer neglects or refuses to settle a confirmed tax obligation when due, LIRS may issue a substitution notice directing third parties connected to the taxpayer to remit the owed amount directly to the Service.
Affected third parties include banks and other financial institutions, employers, tenants, customers, agents, debtors, business partners, and any individual or entity holding funds on behalf of the taxpayer.
How the Process Works:
LIRS explained that upon receipt of a substitution notice, the recipient is legally required to remit the specified amount to the Service from funds belonging to or payable to the defaulting taxpayer. The tax liability is considered settled only to the extent of the amount recovered.
Financial institutions served with such notices are required to act without delay, remit the stated sums, confirm compliance through the LIRS e-Tax platform, and provide information on available account balances where requested.
Similarly, employers, tenants, agents, and other parties must withhold the specified sums from payments due to the taxpayer and remit them within the timeframe stated in the notice.
Where a recipient does not hold or owe any funds to the taxpayer, LIRS directed that the Service must be notified in writing within the stipulated period.
Rights, Penalties, and Compliance:
The revenue agency noted that recipients of substitution notices have the right to object in writing to an assessment within 30 days, in line with the appeal provisions of the law.
However, LIRS warned that failure to comply with substitution directives constitutes an offence under the NTAA 2025. Such non-compliance may attract liability equal to the unpaid tax amount, additional penalties and interest, enforcement actions including distraint, and possible prosecution.
While substitution may lead to partial recovery, LIRS emphasized that defaulting taxpayers remain responsible for any outstanding balance not recovered through third parties and advised taxpayers to regularize their tax status promptly to avoid enforcement actions.
The Service reaffirmed its commitment to strengthening tax compliance and improving revenue collection to support Lagos State’s development agenda.
Source: Africa Publicity
