Owing Tax in Lagos? LIRS Reveals Plans to Seize Funds
The Lagos State Internal Revenue Service (LIRS) has announced plans to enforce the recovery of outstanding taxes from defaulting taxpayers by accessing funds through third parties, including banks, employers, tenants, debtors and business associates.
The move was disclosed in a public notice dated January 21, 2026, obtained from the LIRS website at the weekend.
Signed by the Executive Chairman of the Service, Mr Ayodele Subair, the notice stated that Section 60 of the Nigeria Tax Administration Act, 2025, empowers LIRS to direct any individual or organisation holding money on behalf of, or indebted to, a taxpayer with an unresolved final tax liability to remit such funds to the agency.
LIRS explained that this power of substitution applies to unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax under its administration.
The notice read, “The Lagos State Internal Revenue Service (LIRS) 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 (NTAA 2025), relating to the power of substitution vested in the relevant tax authority.
“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 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.”
Explaining when the measure may be invoked, the notice stated, “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.”
It added, “Banks and other financial institutions, employers, tenants, debtors, customers, agents, business partners and any person owing money to a defaulting taxpayer may be directed to pay such amounts directly to LIRS.”
On procedure, the notice said that “once a substitution notice is issued, the person served is statutorily required to remit to LIRS the amount specified in the notice from funds belonging to, or payable to, the defaulting taxpayer.”
LIRS noted that failure to comply with a substitution directive constitutes an offence under the Act, stressing that a tax obligation is considered settled only to the extent of the amount paid.
The Service added that banks and financial institutions that receive substitution notices must transfer the specified sums immediately, confirm compliance through the LIRS e-Tax platform and, where requested, provide details of the taxpayer’s available balances.
Employers, agents, tenants and other concerned parties were similarly instructed to deduct the stated amounts from funds due to the taxpayer and remit them to LIRS within the timeframe specified.
LIRS further stated that any individual or entity that does not hold or owe funds to the taxpayer must notify the Service in writing within the prescribed period.
The notice also indicated that affected parties may submit written objections to an assessment within 30 days of receiving a substitution notice, in accordance with the appeal provisions of the law.
While substitution may be used as an enforcement tool, LIRS cautioned that defaulting taxpayers remain responsible for any outstanding balance not recovered and urged them to clear their tax liabilities promptly to avoid sanctions.
It warned that failure to comply with substitution directives could result in liability equal to the tax amount stated, additional penalties and interest, enforcement actions including distraint, and possible prosecution.
