The Lagos State Internal Revenue Service (LIRS) has announced plans to enforce its statutory powers to recover unpaid taxes from defaulting taxpayers through third parties, including banks, employers, tenants, debtors and business partners.
The decision is contained in a public notice dated January 21, 2026, and signed by the Executive Chairman of LIRS, Mr Ayodele Subair. The notice was sighted on the agency’s website on Sunday.
According to LIRS, the action is backed by Section 60 of the Nigeria Tax Administration Act (NTAA), 2025, which empowers tax authorities to direct any person holding money on behalf of, or owing money to, a taxpayer with an established final tax liability to remit such funds in settlement of the debt.
The agency 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.
It added that where a taxpayer fails, neglects or refuses to settle an established outstanding tax liability when due, LIRS may direct banks, employers, tenants, debtors, customers, agents, business partners or any person owing money to the taxpayer to pay such amounts directly to the Service.
LIRS stated that once a substitution notice is issued, the person served is legally required to remit the specified amount from funds belonging to, or payable to, the defaulting taxpayer. Failure to comply, it warned, constitutes an offence under the Act.
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The Service noted that banks and financial institutions are required to remit the stated sums without delay, confirm compliance via the LIRS e-Tax platform and, where requested, provide information on the taxpayer’s available balances. Employers, agents, tenants and other affected parties are also required to withhold the specified sums and remit them within the period stated in the notice.
LIRS further explained that any person who does not hold or owe money to the taxpayer must notify the Service in writing within the stipulated period. Affected parties may also object in writing to an assessment within 30 days of receiving a substitution notice, in line with the appeal provisions of the law.
While substitution may be used to recover unpaid taxes, LIRS said defaulting taxpayers remain liable for any outstanding balance not recovered and advised them to settle assessments promptly to avoid penalties.
The Service warned that non-compliance with substitution directives could attract liability equal to the tax amount specified, additional penalties and interest, enforcement actions including distraint, and possible prosecution.