The Lagos Internal Revenue Service (LIRS) has clarified the legal basis and scope of its authority to recover unpaid taxes through the Power of Substitution, as provided under Section 60 of the Nigeria Tax Administration Act, 2025.
According to the Service, the law empowers tax authorities to invoke substitution where a taxpayer fails to pay an assessed and final tax liability when it falls due.
Under this provision, LIRS may lawfully direct third parties—such as banks or other entities—holding funds belonging to a defaulting taxpayer, or owing money to such a taxpayer, to remit those funds directly to LIRS as full or partial settlement of the outstanding tax.
LIRS stressed that the power applies strictly to established tax liabilities that have become final and remain unpaid despite being 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 Service stated.
The agency added that the clarification was necessary to guide taxpayers and third parties on the process.
“This Public Notice clarifies the circumstances, procedure, and obligations associated with the exercise of this statutory power,” LIRS said.
The clarification comes amid increased enforcement efforts by tax authorities to improve compliance and recover outstanding revenues owed to the Lagos State Government.
