The directive is contained in a public notice dated January 21, 2026, and signed by the Executive Chairman of LIRS, Mr Ayodele Subair. The notice, which was sighted on the agency’s website on Sunday, is anchored on Section 60 of the Nigeria Tax Administration Act (NTAA), 2025.
Under the provision, LIRS is empowered to direct any individual or organisation holding money on behalf of a taxpayer, or owing money to a taxpayer with an established and unpaid final tax liability, to remit such funds directly to the Service in settlement or part settlement of the debt.
According to the notice, the power of substitution applies to taxes administered by LIRS, including Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax.
“The Lagos State Internal Revenue Service hereby informs the general public, particularly employers, financial institutions, business operators and tax agents, of the provisions of Section 60 of the Nigeria Tax Administration Act, 2025, relating to the power of substitution vested in the relevant tax authority,” the statement read.
LIRS explained that the substitution mechanism is a lawful and efficient tool for recovering unpaid taxes where a taxpayer fails, neglects or refuses to settle an established tax liability when due. In such circumstances, the Service may issue a substitution notice directing third parties connected to the taxpayer to remit funds due to the taxpayer directly to LIRS.
The agency listed banks and other financial institutions, employers, tenants, debtors, customers, agents and business partners among those that may be served with substitution notices. Once such a notice is issued, the recipient is legally required to remit the specified amount from funds belonging to or payable to the defaulting taxpayer.
LIRS warned that failure to comply with a substitution directive constitutes an offence under the law. It added that a tax liability is deemed settled only to the extent of the amount remitted under the substitution arrangement.
For financial institutions, the Service stated that banks served with substitution notices must remit the specified amount without delay, confirm compliance through the LIRS e-Tax platform, and provide information on the taxpayer’s available balances where requested. Employers, tenants, agents and other affected parties are required to withhold the stated sums from payments due to the taxpayer and remit them to LIRS within the timeframe specified in the notice.
The Service also clarified that any person or entity served with a substitution notice who does not hold or owe funds to the taxpayer must notify LIRS in writing within the stipulated period.
In line with due process, LIRS noted that affected parties have the right to object to an assessment in writing within 30 days of receiving a substitution notice, in accordance with the appeal provisions of the law.
While reiterating its readiness to enforce compliance, the Service advised defaulting taxpayers to regularise their tax affairs promptly. It stressed that taxpayers remain liable for any unpaid balance not recovered through substitution and may face additional enforcement actions.
The notice warned that non-compliance with substitution directives could attract liability equal to the tax amount specified, as well as additional penalties, interest, enforcement measures such as distraint, and possible prosecution under the Act.