LIRS Releases Public Notice on New Tax Law, Banks, Family Members, Others Will Be Use for Collection
The Lagos State Internal Revenue Service (LIRS) is set to enforce the Nigeria Tax Administration Act (NTAA) 2025 to recover unpaid taxes from defaulting taxpayers. The recent public notice from LIRS indicated a robust approach to tax collection, utilizing the statutory Power of Substitution to access funds held by banks, employers, family members, business partners, and others who might owe money to taxpayers who have not settled their tax liabilities.
Under the NTAA 2025, LIRS is empowered to direct any third party holding or owing money to a defaulting taxpayer to remit those funds directly to the tax authority. This authority applies to established final tax liabilities, allowing for both full and partial settlements of outstanding taxes, which include Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT). The notice emphasizes that should a taxpayer fail to settle their tax obligations, LIRS can compel those who hold or owe money to the taxpayer to make the necessary payments on their behalf.
The categories of individuals and entities that can be used as replacements in this process include banks and financial institutions, employers, tenants, debtors, agents, business partners, and any others who may hold or owe money to the taxpayer. Once a substitution notice is issued, the recipient is legally bound to remit the specified amount to LIRS. Non-compliance will be deemed an offense pursuant to the provisions of the Act, showcasing LIRS’s commitment to enforcing tax compliance.
In terms of operational processes, banks and financial institutions are required to verify and confirm compliance via LIRS’s e-Tax platform. They must provide updates on available balances, and if requested, any encumbrances related to the taxpayer. This enforcement mechanism aims not only to strengthen tax compliance but also to enhance revenue mobilization for developing Lagos State.
Despite its strict nature, LIRS clarifies that its Power of Substitution is not intended to punish taxpayers but rather to ensure their compliance and facilitate uninterrupted funding for public services and developmental projects within the state. The agency encourages all parties involved—financial institutions, employers, and taxpayers—to familiarize themselves with the provisions of the new Act and comply promptly to avoid penalties.
Additionally, as government reforms are about to be implemented, citizens and businesses need to be more vigilant about their bank transactions, especially concerning transaction narrations, since these will soon play a crucial role in ensuring tax compliance. This push for increased scrutiny is part of a broader initiative set to launch by January 2026, which will leverage digital banking data to streamline tax processes.
In conclusion, the LIRS’s initiative represents a significant shift in tax administration in Lagos, focusing on utilizing legal means to recover unpaid taxes effectively. It is a proactive step aimed at improving tax collection and ensuring that resources are available for the state’s developmental needs while fostering a culture of compliance among taxpayers.
