Tax law empowers Lagos to recover unpaid taxes through tenants, banks - LIRS

The Lagos State Internal Revenue Service (LIRS) says it willexercise its legal authority to recover outstanding taxes from non-complianttaxpayers through third parties such as banks, employers, debtors, tenants, andbusiness partners. In a recent public notice, LIRS said this action is in linewith provisions of section 60 of the Nigeria Tax Administration Act, 2025 (NTAA2025), which grants the service the power of substitution. “The NTAA 2025 empowers the Lagos State Internal RevenueService to direct any person holding money on behalf of, or owing money to, ataxpayer who has failed to pay an established final tax liability when due, toremit such money to the Service in settlement (or partial settlement) of theoutstanding tax,” the statement reads. “The Power of Substitution is a lawful collection mechanismdesigned to ensure efficient recovery of unpaid taxes, including PersonalIncome Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax(WHT) administered by LIRS. “This Public Notice clarifies the circumstances, procedure,and obligations associated with the exercise of this statutory power. “Where a taxpayer fails, neglects or refuses to settle anyestablished outstanding tax liability when due, LIRS may exercise its powerunder section 60 to direct any of the following persons to pay the amount owedby the taxpayer.” Such individuals include customers of the taxpayer, agents,and anyone holding funds on the taxpayer’s behalf. The agency said it can also recover funds from any personwho owes money to the taxpayer, whether the debt is currently due or stillaccruing. LIRS said once a substitution notice is issued, therecipient is legally required to remit to the service the amount stated in thenotice from funds belonging to or payable to the defaulting taxpayer. “The tax liability is deemed paid to the extent of theremittance made pursuant to the substitution. Failure to comply with suchdirective constitutes an offence under the Act,” LIRS said. ‘ALL BANKS TO REMIT AMOUNT TO LIRS’Upon receipt of a substitution notice, the service said allbanks and other financial institutions are “required to remit the stated amountto LIRS without delay and provide confirmation of compliance through the LIRSe-Tax platform: www.etax.lirs.net”. “Banks are also required to report the taxpayer’s availablebalances and any encumbrances as may be requested,” LIRS said. The service instructed employers, agents, tenants, and otheraffected parties to withhold the specified amounts from funds due to thetaxpayer and remit them to LIRS within the timeframe stated in the notice. LIRS also clarified that any person who does not hold or owemoney to the taxpayer must inform the tax agency in writing within thestipulated period. The notice further explained that recipients may file awritten objection to an assessment within 30 days of receiving a substitutionnotice, in line with the appeal provisions of the law. While enforcement may be carried out through substitution,LIRS emphasised that defaulting taxpayers remain responsible for any unpaidbalance not recovered and urged them to settle outstanding assessments promptlyto avoid penalties. The service warned that failure to comply with substitutiondirectives could result in liability equal to the tax amount specified,additional penalties and interest, enforcement actions including distraint, andpossible prosecution.

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