The Lagos State Internal Revenue Service (LIRS) says it will begin enforcing its statutory power of substitution under the Nigeria Tax Administration Act (NTAA) 2025 to recover outstanding tax liabilities from defaulting taxpayers.
The disclosure was made in a public notice issued by the agency, outlining how it intends to apply Section 60 of the Act.
This follows the commencement of the implementation of the NTAA by the federal government amid controversies over alleged alterations to some parts of the law in the gazette copy.
According to the LIRS, Section 60 of the Nigeria Tax Administration Act 2025 authorises tax authorities to invoke the power of substitution where a taxpayer fails to pay an assessed and final tax liability when due.
“The Power of Substitution is a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax (WHT) administered by LIRS,” the LIRS stated.
“This Public Notice clarifies the circumstances, procedure, and obligations associated with the exercise of this statutory power,” it added.
The tax authority explained that substitution notices may be issued when a taxpayer neglects or refuses to settle an established tax liability.
In such cases, LIRS may serve notices on a wide range of third parties connected to the taxpayer who are in possession of, or expected to receive, the taxpayer’s funds. These include:
Once a substitution notice is served, the recipient is legally required to remit the specified amount to LIRS from funds belonging to or payable to the defaulting taxpayer, with any remittance deemed to have settled the tax liability to the extent of the amount paid.
LIRS also placed specific compliance obligations on banks and other financial institutions that may be served substitution notices.
According to the notice, affected institutions are required to remit the stated amount to LIRS without delay once such a directive is received.
The Service warned that substitution notices are legally binding on all parties served and must be treated as mandatory directives under the law.
The enforcement move comes amid the rollout of Nigeria’s newly enacted tax reform framework.
Despite controversies surrounding alleged alterations to gazetted copies of the laws, the federal government began the implementation of four new tax laws in January.