Tax: LIRS Gets Power to Reach Into Bank Accounts of Tax Defaulters

Tax defaulters in Lagos risk having funds recovered through third parties as the Lagos State Internal Revenue Service moves to activate enforcement powers granted under the law.

The agency disclosed, via a notice released on January 21, 2026, that it may compel institutions and individuals connected to defaulting taxpayers, including banks, employers, tenants, debtors and business collaborators, to surrender monies linked to unresolved tax obligations.

According to LIRS, the authority for this action is provided by the Nigeria Tax Administration Act, 2025, which allows the service to intercept funds belonging to a taxpayer once a final assessment remains unpaid.

The revenue service added that the measure applies to various taxes under its control, including personal income tax, capital gains tax, stamp duties and withholding tax.

The notice read, “The Lagos State Internal Revenue Service (LIRS) issues this public notice to inform 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 (NTAA 2025), relating to the power of substitution vested in the relevant tax authority.

“The NTAA 2025 empowers the Lagos State Internal Revenue Service to direct any person holding money on behalf of, or owing money to, a taxpayer who has failed to pay an established final tax liability when due, to remit such money to the Service in settlement (or partial settlement) of the outstanding tax.

“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.”

Clarifying the circumstances that may warrant such action, the notice stated, “Where a taxpayer fails, neglects or refuses to settle any established outstanding tax liability when due, LIRS may exercise its power under Section 60 to direct any of the following persons to pay the amount owed by the taxpayer.”

It said, “Banks and other financial institutions, employers, tenants, debtors, customers, agents, business partners and any person owing money to a defaulting taxpayer may be directed to pay such amounts directly to LIRS.”

LIRS outlined that once a substitution order is served, the recipient is legally obligated to transfer the stated sum to the Service from any funds held for, or payable to, the tax defaulter.

The agency warned that ignoring such a directive amounts to a breach of the law, noting that a taxpayer’s obligation is considered discharged only to the extent of the amount successfully recovered.

LIRS advised affected persons and organisations to comply promptly with any substitution notices issued, stressing that the measure is intended to strengthen tax compliance and protect state revenue. The Service also encouraged taxpayers to regularise their tax affairs to avoid enforcement actions, while reaffirming its commitment to administering the tax system in line with the law and established due process.

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