LIRS TO RECOVER UNPAID TAXES THROUGH BANKS, EMPLOYERS, OTHERS
Read Time:2 Minute, 11 Second
By Aishat Momoh. O.
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 was contained in a public notice dated January 21, 2026, and published on the official website of the agency.
According to the notice signed by the Executive Chairman of LIRS, Mr Ayodele Subair, the agency derives its authority from Section 60 of the Nigeria Tax Administration Act (NTAA), 2025, which empowers tax authorities to recover outstanding tax liabilities through a process known as substitution.
LIRS explained that the power of substitution allows the Service to direct any individual or organisation holding funds on behalf of, or owing money to, a taxpayer who has failed to settle an established final tax liability, to remit such funds directly to the Service.
The agency said the provision applies to unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax administered by LIRS.
“The power of substitution is a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes,” the notice stated, adding that the measure would be applied where a taxpayer fails, neglects or refuses to pay outstanding tax liabilities when due.
Under the arrangement, banks and other financial institutions, employers, tenants, customers, agents, business partners and other debtors of a defaulting taxpayer may be directed to remit the specified sums directly to LIRS.
The Service noted that once a substitution notice is issued, the recipient is legally required to comply by remitting the stated amount from funds belonging to or payable to the taxpayer.
LIRS further warned that failure to comply with a substitution directive constitutes an offence under the Act. It clarified that a taxpayer’s liability is considered settled only to the extent of the amount remitted under the substitution.
The agency added that banks and financial institutions served with substitution notices must remit the specified sums without delay, confirm compliance via the LIRS e-Tax platform and, where requested, provide information on the taxpayer’s available account balances.
Employers, agents, tenants and other affected parties were also directed to withhold the stated amounts from funds due to the taxpayer and remit same to LIRS within the period specified in the notice.
LIRS advised individuals or organisations who do not hold or owe funds to the affected taxpayer to formally notify the Service in writing within the stipulated timeframe.
The Service reaffirmed its commitment to strengthening tax compliance in Lagos State and urged taxpayers to settle outstanding liabilities promptly to avoid enforcement actions.
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