The Lagos State Internal Revenue Service has declared that it will use third-party agents to collect unpaid taxes from defaulting taxpayers, including banks, employers, debtors, tenants, and business partners.
This is featured in a public notification dated January 21, 2026, which our correspondent found on the LIRS website on Sunday.
According to a notice signed by LIRS Executive Chairman Mr. Ayodele Subair, Section 60 of the Nigeria Tax Administration Act, 2025, empowers the state revenue service to direct any person holding money on behalf of, or owing money to, a taxpayer who has failed to settle a final tax liability to remit such funds.
The agency stated that the power of substitution applies to unpaid personal income tax, capital gains tax, stamp duties, and withholding tax administered by LIRS.
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.”
Speaking on the circumstances that may warrant such action, 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 said, “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.”
Speaking on the process, the notice stated 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 explained that failing to comply with a substitute directive is an infraction under the Act and that the tax liability is only regarded as satisfied to the extent of the sum paid.
According to the Service, banks and financial institutions served with substitution letters must promptly repay the indicated amount, confirm compliance via the LIRS e-Tax platform, and provide information on the taxpayer’s available balances as requested.
Employers, agents, tenants, and other impacted parties were also ordered to withhold the specified sums from funds owed to the taxpayer and remit them to LIRS within the timeframe provided in the notice.
LIRS stated that anyone who does not hold or owe money to the taxpayer must tell the Service in writing within the timeframe specified.
The notice further said that affected parties can object to an assessment in writing within 30 days of receiving a substitute notice, in accordance with the law’s appeal provisions.
While enforcement proceedings may be initiated through substitution, LIRS stated that delinquent taxpayers are still accountable for any unpaid balance that is not collected and recommended them to settle outstanding assessments as soon as possible to avoid penalties.
The notice said that noncompliance with substitution orders could result in liabilities equal to the specified tax amount, plus penalties and interest, enforcement measures such as distraint, and possible prosecution.
