LIRS Releases Public Notice on New Tax Law, Banks, Family Members, Others Will Be Use for Collection
- Lagos State Internal Revenue Service is set to enforce Nigeria Tax Administration Act 2025 to recover unpaid tax
- Banks, employers, tenants, agents, business partners, and anyone holding or owing money will be use to collect the tax
- There are obligations on the use LIRS e-Tax platform for tax remittance by financial institutions
Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks and energy markets.
Lagos State Internal Revenue Service (LIRS) has issued a public notice which indicates banks, employers, family members, business partners, and other stakeholders will be used to recover outstanding tax liabilities from defaulting taxpayers using the statutory Power of Substitution.
In the notice LIRS announced that it will begin enforcing its statutory Power of Substitution captured in the Nigeria Tax Administration Act (NTAA) 2025.
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Substitution to collect tax of defaulters
According to the notice, the NTAA 2025 empowers LIRS 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, to remit such funds directly to the Service.
This can be done in full or partial settlement of the outstanding tax.
Part of the notice reads:
"Where a taxpayer fails, neglects or refuses to settle any established outstanding tax liability when due, LIRS may exercise its power under Section 60."
This can be done in full or partial settlement of the outstanding tax.
The Power of Substitution is a statutory mechanism designed to ensure the efficient recovery of unpaid taxes, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT) administered by LIRS.
The notice listed those that can be used as substitute to include:
1. Banks and other financial institutions
2. Employers
3. Tenants, debtors, or customers of the taxpayer
4. Agents, business partners, and any person holding money on behalf of the taxpayer
5. Any person owing money to the taxpayer, whether presently due or accruing
How it will work?
Once a substitution notice is issued, the recipient is legally required to remit the specified amount from funds belonging to, or payable to, the defaulting taxpayer.
The tax liability is deemed paid to the extent of the remittance, and failure to comply constitutes an offence under the Act.
Banks and financial institutions are also required to confirm compliance through the LIRS e-Tax platform and provide information on the taxpayer’s available balances and any encumbrances if requested.
The notice said that this statutory power is intended to strengthen tax compliance and improve revenue mobilization for Lagos State.
Source: Getty Images
LIRS noted that the Power of Substitution is not intended to be punitive but is a lawful measure to ensure that taxpayers meet their obligations while enabling the state to fund developmental projects and provide public services.
The Service urged all stakeholders to familiarize themselves with the provisions of the Act and comply promptly to avoid legal penalties.
Bank transfer narrations to avoid paying tax
Earlier, Legit.ng reported that Nigerians may need to pay closer attention to the details of their bank transfer narrations as the federal government gears up to implement a new tax regime starting January 2026.
The government has indicated that the reform will leverage digital banking data to enhance tax compliance, making the accuracy of transaction descriptions increasingly important.
Source: Legit.ng
