The Lagos State Internal Revenue Service (LIRS) will now recover outstanding tax liabilities directly from the banks of defaulting taxpayers and other third parties upon issuing a substitution notice.
The LIRS said it will recover outstanding taxes, including Personal Income Tax, Capital Gains Tax, Stamp Duties, and Withholding Tax, via substitution notices, as authorised by section 60 of the Nigerian Tax Administration Act (NTAA) 2025.
In a public notice referencedĀ LIRS/003/01/2026, and signed by its chairman, Ayo Subair, the state tax authority listed employers, tenants, customers, debtors, agents, business partners, and anyone holding or owing money to the taxpayer as third parties.
According to a January 21 notice, the state tax authority has begun implementing tax laws. These laws, as noted in the interim report of the Victor Ogene-led House committee, were altered, and sources toldĀ InsideBusinessNG they are currently undergoing review and amendment to restore them to the original version signed by federal lawmakers and approved by President Tinubu.
Section 60 of the Gazetted NTAA 2025 addresses the power of substitution, stating that:, “The relevant tax authority may, without an order of the High Court and by notice in writing, appoint any person to be agent of a taxable person where (a) any tax has become due and payable, and the taxable person has refused to pay, or (b) the agent appointed is in possession or is expected to be in possession of the money, funds or assets of the taxable person.
Subsection 2 provides that ” the agent appointed under subsection 1 shall be required to pay any tax payable by the taxable person from any money, funds, or assets of the person which may be held by the agent of the person.
Subsection 3 notes that “where the agent referred to in subsection 2 defaults, all such enforcement and recovery actions, including the power to distrain the money, funds or assets of the person, shall apply as if the agent so appointed were originally liable.
Subsection 4 provides, “For the purpose of this section, the relevant tax authority may requireĀ any person to give information as to money, funds, or other assets which may be held for, or due to any person.
Subsection 5 of this Act with respect to objections and appeals shall apply to any notice given under this section as if such notice were an assessment or demand notice.
The Lagos tax authority’s notice clarifies that if a taxpayer fails to pay outstanding tax liabilities when due, LIRS may use section 60 of the NTAA 2025 to compel third parties to pay the owed amount.
“Once a substitution notice is issued, the person served is statutorily required to remit to LIRSĀ the amount specified in the notice from funds belonging to, orĀ 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 a directive constitutes an offence under the act”, noted the LIRS
Banks and financial institutions must promptly remit the specified amounts and confirm compliance via the LIRS e-Tax platform. They must also disclose the taxpayer’s account balances and any associated encumbrances.
The LIRS mandates that employers, agents, tenants, and agents of defaulting taxpayers served with a substitution notice must withhold the specified amount owed to the taxpayer, remit it to the tax authority, and provide payment evidence as prescribed.
LIRS warned that non-compliance with a Section 60 substitution directive will result in liability for the specified amount, treated as the individual’s original tax liability. Interest, penalties, and enforcement measures, including distraint under NTAA 2025, will apply, and further non-compliance may lead to prosecution.
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