LIRS Says Fake Transactions to Reduce Tax will Attract Penalties from January 2026
- LIRS says artificial or fictitious transactions used to reduce tax will be ignored under the NTAA 2025
- The warning applies to companies, individuals, partnerships, and other taxpayers in Lagos State
- Taxpayers may face audits, penalties, and additional tax payments if found non-compliant
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Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology and macroeconomic trends in Nigeria.
The Lagos State Internal Revenue Service (LIRS) has warned individuals and businesses against engaging in artificial or fictitious transactions aimed at reducing tax obligations.
The agency said such arrangements will be disregarded under the Nigeria Tax Administration Act (NTAA), 2025, and could expose affected taxpayers to investigations, penalties, and additional tax assessments.
Source: Getty Images
LIRS made this known in a public notice dated January 21, 2026, and signed by its Executive Chairman, Ayodele Subair.
According to the notice, the directive applies to all taxpayers in Lagos State, including companies, partnerships, trusts, individuals, and other stakeholders.
Fictitious transactions are against the law – LIRS
The LIRS explained that under Section 46 of the NTAA 2025, any transaction considered artificial or fictitious, especially where it results in reduced tax liability, may be ignored or adjusted by the relevant tax authority.
The agency added that transactions between connected persons, such as related companies or individuals, will also be treated as artificial if they are not conducted at arm’s length, meaning on terms that independent parties would normally agree to.
It stated that taxpayers affected by such adjustments would be liable for revised assessments and any additional taxes arising, although they retain the right to appeal.
LIRS further noted that it has the power to recast or disregard any arrangement primarily structured to avoid tax and that any resulting penalties, interest, or extra charges would be borne by the taxpayer.
Artificial transactions can trigger audits
The service also warned that artificial transactions could trigger audits and investigations as provided under the NTAA.
On compliance, LIRS advised taxpayers to ensure all transactions are genuine, commercially driven, and properly documented.
It also urged taxpayers to maintain full records, disclose relationships with connected persons, and respond promptly to requests for clarification during audits or reviews.
The agency referenced the Income Tax (Transfer Pricing) Regulations, 2018, which require disclosure of related-party transactions, especially where at least one party is not a corporate entity.
LIRS said it reserves the right to demand transfer pricing documentation for dealings between companies and individual shareholders, including loans, write-offs, leases, and advances.
The revenue service stressed that transparent and accurate disclosures form part of taxpayers’ legal obligations, warning that failure to comply or providing misleading information would attract administrative penalties.
The public notice takes effect from January 1, 2026, in line with the commencement of the newly gazetted tax laws.
Source: Getty Images
LIRS shuts Shoprite over tax default
Legit.ng earlier reported that the LIRS shut the Shoprite outlet at Ikeja City Mall over what it described as the company’s failure to comply with its tax obligations.
According to a notice displayed at the entrance of the store, LIRS took the action in line with provisions of the law.
In the notice, the LIRS stated that the alleged breach is punishable under Section 94 of the Personal Income Tax Act, 2011 (as amended).
Source: Legit.ng
