The Lagos State Internal Revenue Service (LIRS) says it will exercise its legal authority to recover outstanding taxes from non-compliant taxpayers through third parties such as banks, employers, debtors, tenants, and business partners.
In a recent public notice, LIRS said this action is in line with provisions of section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025), which grants the service the power of substitution.
“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 statement reads.
“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.
“This Public Notice clarifies the circumstances, procedure, and obligations associated with the exercise of this statutory power.
“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.”
Such individuals include customers of the taxpayer, agents, and anyone holding funds on the taxpayer’s behalf.
The agency said it can also recover funds from any person who owes money to the taxpayer, whether the debt is currently due or still accruing.
LIRS said once a substitution notice is issued, the recipient is legally required to remit to the service the amount stated in the notice from funds belonging to or payable to the defaulting taxpayer.
“The tax liability is deemed paid to the extent of the remittance made pursuant to the substitution. Failure to comply with such directive constitutes an offence under the Act,” LIRS said.
Upon receipt of a substitution notice, the service said all banks and other financial institutions are “required to remit the stated amount to LIRS without delay and provide confirmation of compliance through the LIRS e-Tax platform: www.etax.lirs.net”.
“Banks are also required to report the taxpayer’s available balances and any encumbrances as may be requested,” LIRS said.
The service instructed employers, agents, tenants, and other affected parties to withhold the specified amounts from funds due to the taxpayer and remit them to LIRS within the timeframe stated in the notice.
LIRS also clarified that any person who does not hold or owe money to the taxpayer must inform the tax agency in writing within the stipulated period.
The notice further explained that recipients may file a written objection to an assessment within 30 days of receiving a substitution notice, in line with the appeal provisions of the law.
While enforcement may be carried out through substitution, LIRS emphasised that defaulting taxpayers remain responsible for any unpaid balance not recovered and urged them to settle outstanding assessments promptly to avoid penalties.
The service warned that failure to comply with substitution directives could result in liability equal to the tax amount specified, additional penalties and interest, enforcement actions including distraint, and possible prosecution.
