Lagos strikes to grab unpaid taxes immediately from banks and third events

The Lagos State Inner Income Service (LIRS) says it’ll start implementing its statutory energy of substitution below the Nigeria Tax Administration Act (NTAA) 2025 to recuperate excellent tax liabilities from defaulting taxpayers.

The disclosure was made in a public discover issued by the company, outlining the way it intends to use Part 60 of the Act.

This follows the graduation of the implementation of the NTAA by the federal authorities amid controversies over alleged alterations to some elements of the legislation within the gazette copy.

What the LIRS is saying 

Based on the LIRS, Part 60 of the Nigeria Tax Administration Act 2025 authorises tax authorities to invoke the ability of substitution the place a taxpayer fails to pay an assessed and remaining tax legal responsibility when due.

• Below this provision, the Service can legally direct third events holding funds belonging to a taxpayer, or owing cash to such taxpayer, to remit these funds to LIRS in settlement or partial settlement of unpaid taxes.
• LIRS famous that the supply applies solely to established tax liabilities which have change into remaining and stay unpaid regardless of being due.

“The Energy of Substitution is a lawful assortment mechanism designed to make sure environment friendly restoration of unpaid taxes, together with Private Revenue Tax (PIT), Capital Good points Tax (CGT), Stamp Duties and Withholding Tax (WHT) administered by LIRS,” the LIRS said.

“This Public Discover clarifies the circumstances, process, and obligations related to the train of this statutory energy,” it added.

Extra insights 

The tax authority defined that substitution notices could also be issued when a taxpayer neglects or refuses to settle a longtime tax legal responsibility.

In such circumstances, LIRS could serve notices on a variety of third events linked to the taxpayer who’re in possession of, or anticipated to obtain, the taxpayer’s funds. These embrace:

• Banks and different monetary establishments holding funds on behalf of the taxpayer
• Employers, tenants, clients, debtors, brokers, or enterprise companions of the taxpayer
• Any particular person or entity owing cash to the taxpayer, whether or not at present due or anticipated to accrue

As soon as a substitution discover is served, the recipient is legally required to remit the required quantity to LIRS from funds belonging to or payable to the defaulting taxpayer, with any remittance deemed to have settled the tax legal responsibility to the extent of the quantity paid.

Obligations on monetary establishments 

LIRS additionally positioned particular compliance obligations on banks and different monetary establishments which may be served substitution notices.

Based on the discover, affected establishments are required to remit the said quantity to LIRS directly as soon as such a directive is obtained.

• Monetary establishments are anticipated to verify compliance by the LIRS e-Tax platform.
• Banks could be required to offer particulars of the taxpayer’s obtainable account balances and any current encumbrances.
• Failure to adjust to a substitution directive constitutes an offence below the NTAA 2025.

The Service warned that substitution notices are legally binding on all events served and have to be handled as obligatory directives below the legislation.

What it is best to know 

The enforcement transfer comes amid the rollout of Nigeria’s newly enacted tax reform framework.

Regardless of controversies surrounding alleged alterations to gazetted copies of the legal guidelines, the federal authorities started the implementation of 4 new tax legal guidelines in January.

• The new legal guidelines embrace the Nigerian Income Service Institution Act; the Joint Income Service Institution Act, which commenced on June 26, 2025; The Nigerian Tax Act (NTA); and the Nigerian Tax Administration Act (NTAA)
• The NTAA supplies a unified authorized framework for tax administration throughout federal and state tax authorities, together with enforcement mechanisms similar to the ability of substitution now being invoked by LIRS.