The Lagos State Internal Revenue Service has announced plans to enforce its statutory power of substitution under the Nigeria Tax Administration Act 2025 to recover unpaid tax obligations from defaulting taxpayers.

The agency made this known in a public notice, explaining that the action will be carried out in line with Section 60 of the Act.

The move comes as the federal government begins implementing the NTAA, amid ongoing controversies over alleged changes in portions of the law as published in the official gazette.

According to LIRS, Section 60 of the Nigeria Tax Administration Act 2025 empowers tax authorities to exercise the power of substitution when a taxpayer fails to settle an assessed and final tax liability as at when due.

Under the provision, the Service may legally instruct third parties holding funds on behalf of a taxpayer, or those indebted to the taxpayer, to remit such funds to LIRS as full or partial payment of outstanding taxes.

The agency added that the measure applies strictly to confirmed tax liabilities that are final and remain unpaid after the due date.

“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 said substitution notices would be issued when a taxpayer fails or refuses to pay a confirmed tax liability.

In such situations, LIRS may direct a broad range of third parties associated with the taxpayer who possess, or are due to receive, the taxpayer’s funds to remit the money accordingly.

This may include banks and other financial institutions holding funds for the taxpayer, as well as employers, tenants, customers, debtors, agents, business partners, or any individual or entity that owes money to the taxpayer, whether immediately due or expected in the future.

Upon service of a substitution notice, the recipient is legally obligated to remit the specified sum to LIRS from funds belonging to or payable to the defaulting taxpayer.

Any amount remitted is deemed to have settled the tax liability to the extent of the payment made.

The notice stated that affected institutions must remit the specified sums to LIRS immediately upon receiving a substitution directive.

Banks are also required to confirm compliance through the LIRS e-Tax platform and may be asked to provide information on the taxpayer’s account balances and any existing liens or restrictions.

LIRS warned that non-compliance with a substitution order is an offence under the NTAA 2025.

The move aligns with the ongoing rollout of Nigeria’s new tax reform framework.

Although there have been disputes over alleged modifications in the gazetted copies of the laws, the federal government began implementing four new tax statutes in January.