The Lagos State Internal Revenue Service (LIRS) has announced that a new tax law now empowers state revenue authorities to recover unpaid taxes by seizing funds not only from defaulters’ bank accounts but also from those of employers, business partners, friends, family members and other third parties connected to them.
According to LIRS, the Nigeria Tax Administration Act (NTAA) 2025 authorises direct recovery of outstanding tax liabilities where a taxpayer fails to remit assessed taxes when due.
In a statement, the service explained that the law allows deductions from rent payments and funds held by employers, tenants, agents, business partners or any individual holding money on behalf of a defaulting taxpayer.
LIRS noted that the enforcement powers under the Act extend beyond a taxpayer’s personal accounts to include accounts of individuals or entities financially linked to the defaulter.
Citing Section 60 of the NTAA 2025, the agency said it is authorised to issue substitution notices to banks, employers, tenants, debtors and other parties holding or owing money to a tax defaulter, directing them to remit such funds to the state in settlement of the tax debt.
“Where a taxpayer fails, neglects or refuses to settle any established outstanding tax liability when due, LIRS may exercise its powers under Section 60 to direct banks and other financial institutions, employers, tenants, agents, business partners, customers or any person holding or owing money to the taxpayer to pay the amount due,” the service stated.
LIRS added that once a substitution notice is issued, financial institutions are required by law to disclose the relevant account balances and remit the outstanding tax amount without delay.
Upon payment, a receipt confirming settlement is issued and recorded on the LIRS e-Tax platform.
The service warned that failure to comply with a substitution directive constitutes an offence under the law, stressing that third parties who hold funds belonging to a tax defaulter may be held financially liable if they fail to cooperate.
The NTAA 2025, which took effect on January 1, has however generated controversy, with some lawmakers accusing the federal government of introducing unauthorised changes to the gazetted version of the Act.
