Lagos has moved to enforce tax recovery through banks, employers, and tenants under new substitution powers.
NewsOnline Nigeria reports that the Lagos State Internal Revenue Service (LIRS) has announced plans to enforce its statutory powers to recover unpaid taxes from defaulting taxpayers by engaging third parties such as banks, employers, tenants, debtors and business partners.
The directive was contained in a public notice dated January 21, 2026, and published on the LIRS website. The notice, signed by the Executive Chairman of LIRS, Ayodele Subair, said the agency derives its authority from Section 60 of the Nigeria Tax Administration Act (NTAA), 2025.
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According to LIRS, the law empowers the Service to direct any individual or organisation holding funds 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 agency.
The Service explained that the power of substitution applies to unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax 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 read.
LIRS stated that where a taxpayer fails, neglects or refuses to settle an established tax liability when due, it may direct banks, employers, tenants, debtors, customers, agents or business partners of the taxpayer to pay the owed amount directly to the Service.
The agency noted that once a substitution notice is issued, the person or entity served is legally required to remit the specified amount from funds belonging to, or payable to, the defaulting taxpayer. Failure to comply with such a directive, it warned, constitutes an offence under the Act.
LIRS further clarified that banks and financial institutions must remit the stated sums without delay, confirm compliance through the LIRS e-Tax platform, and provide information on the taxpayer’s account balances where required.
Employers, tenants, agents and other affected parties are also required to deduct the specified amounts from funds due to the taxpayer and remit same to LIRS within the period stated in the notice.
The Service added that any person who does not hold or owe funds to the taxpayer must notify LIRS in writing within the stipulated timeframe. It also noted that objections to substitution notices may be filed in writing within 30 days, in line with the appeal provisions of the law.
While stressing that substitution is a lawful tax recovery mechanism, LIRS warned that defaulting taxpayers remain liable for any outstanding balance not recovered. It advised taxpayers to settle their liabilities promptly to avoid penalties, interest, enforcement actions such as distraint, and possible prosecution.
