- LIRS Invokes Power of Substitution to Clamp Down on Tax Defaulters
- Substitution directives may be served on banks and other financial institutions
- LIRS warned that failure to comply with a substitution notice constitutes an offence under the NTAA 2025 and may attract sanctions
The Lagos State Internal Revenue Service (LIRS) has announced new measures to strengthen the recovery of outstanding tax liabilities, warning employers, banks, business operators and tax agents to comply with enforcement provisions under the Nigeria Tax Administration Act (NTAA) 2025.
Eko Hot Blog reports that in a public notice issued pursuant to Section 60 of the Act, LIRS said it is empowered to recover unpaid taxes through the Power of Substitution, which allows the Service to direct any person or institution holding funds on behalf of a defaulting taxpayer to remit such funds directly to the government.
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The agency explained that the measure applies where a taxpayer has failed to settle an established and final tax liability when due. Taxes covered under the enforcement include Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax administered by LIRS.
According to the notice, substitution directives may be served on banks and other financial institutions, employers, tenants, debtors, customers, agents or business partners of the taxpayer, as well as any individual or entity owing money to, or holding funds for, the defaulting taxpayer.
“Once served, the affected party is legally required to remit the specified amount from funds belonging to or payable to the taxpayer,” LIRS stated, adding that any amount recovered under the directive would be treated as tax paid to the extent of the sum remitted.
LIRS warned that failure to comply with a substitution notice constitutes an offence under the NTAA 2025 and may attract sanctions.
The Service further stated that banks and financial institutions are expected to remit the required amounts without delay and confirm compliance via the LIRS e-Tax platform. Where necessary, they may also be required to provide information on the taxpayer’s account balances and any existing encumbrances.
The notice, LIRS said, is intended to clarify the legal framework, procedures and obligations surrounding the exercise of the Power of Substitution as the agency intensifies efforts to improve tax compliance and boost revenue collection in Lagos State.
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