The Lagos State Internal Revenue Service (LIRS) has announced that it will begin enforcing its statutory powers to recover unpaid taxes from defaulting taxpayers through banks, employers, tenants, debtors and business partners.
The directive is contained in a public notice dated January 21, 2026, and published on the official LIRS website.
LIRS Cites Nigeria Tax Administration Act, 2025
According to the notice signed by the Executive Chairman of LIRS, Mr Ayodele Subair, the agency is empowered under Section 60 of the Nigeria Tax Administration Act (NTAA), 2025, to recover outstanding tax liabilities through a process known as substitution.
The law authorises LIRS to direct any person or institution holding money on behalf of, or owing money to, a defaulting taxpayer to remit such funds directly to the tax authority.
Taxes Covered Under Substitution Powers
LIRS said the power of substitution applies to the following taxes administered by the agency:
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Personal Income Tax (PIT)
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Capital Gains Tax (CGT)
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Stamp Duties
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Withholding Tax (WHT)
“The power of substitution is a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes,” the notice stated.
Who May Be Directed to Pay LIRS
The agency explained that where a taxpayer fails, neglects or refuses to settle an established final tax liability, LIRS may issue a substitution notice to any of the following:
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Banks and other financial institutions
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Employers
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Tenants
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Debtors and customers
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Agents and business partners
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Any person owing money to the defaulting taxpayer
Such persons may be directed to pay the amount owed directly to LIRS, either in full or in part.
Compliance Mandatory Once Notice Is Issued
LIRS stated that once a substitution notice is served, the recipient is statutorily required to remit the specified amount from funds belonging to, or payable to, the taxpayer.
Banks and financial institutions are required to:
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Remit the stated amount without delay
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Confirm compliance through the LIRS e-Tax platform
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Provide information on available balances where requested
Employers, tenants, agents and other affected parties are also required to withhold the specified sums and remit them within the period stated in the notice.
Failure to Comply Is an Offence — LIRS
The Service warned that failure to comply with a substitution directive constitutes an offence under the law.
LIRS added that:
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The tax liability is deemed settled only to the extent of the amount remitted
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Defaulting taxpayers remain liable for any outstanding balance
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Non-compliance may attract penalties, interest, distraint, and possible prosecution
Any person who does not hold or owe money to the taxpayer is required to notify LIRS in writing within the stipulated period.
Right to Object or Appeal
The notice further stated that affected parties may object in writing to an assessment within 30 days of receiving a substitution notice, in line with appeal provisions under the law.
LIRS advised taxpayers to settle outstanding tax liabilities promptly to avoid enforcement actions and additional penalties.
