The Lagos State Internal Revenue Service (LIRS) has unveiled a new enforcement strategy to recover unpaid taxes from defaulting taxpayers.
It will do so tapping into third-party channels such as banks, employers, business partners, tenants and other entities that hold money for or owe money to defaulters.
In a public notice dated January 21, 2026, the revenue agency said it will begin issuing “power of substitution” notices under Section 60 of the Nigeria Tax Administration Act, 2025, a legal provision that allows the tax authority to instruct third parties to remit funds on behalf of taxpayers who have failed to settle their obligations.
Under the new mechanism, LIRS can issue substitution directives for outstanding liabilities on taxes administered by the agency, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax (WHT).
According to the notice, banks and other financial institutions that receive substitution notices are required to transfer the specified amounts directly to LIRS without delay, confirm compliance via the agency’s e-Tax platform, and provide information about the taxpayer’s available balances when requested.
Similarly, employers, tenants, debtors, customers, agents and business partners may be directed to withhold money due to the defaulting taxpayer and remit those funds to the tax authority within the period specified in the notice.
LIRS clarified that non-compliance with substitution directives constitutes an offence under the tax law.
The agency warned that failure to obey substitution notices could result in penalties equal to the unpaid tax amount, additional interest, enforcement measures such as distraint, and even prosecution.
While enforcement through substitution is now an option, the tax authority stressed that defaulting taxpayers remain responsible for any balance not recovered through third-party payments
Th agency urged individuals and businesses to regularise outstanding tax assessments promptly to avoid sanctions.
