LIRS Enforces New Power of Substitution Under Nigeria Tax Administration Act (NTAA) 2025
In a bold move to ensure efficient tax collection, the Lagos State Internal Revenue Service (LIRS) has announced it will begin utilizing its statutory power of substitution under the Nigeria Tax Administration Act (NTAA) 2025 to recover unpaid tax liabilities from defaulting taxpayers. The notice was issued following the recent implementation of the NTAA 2025, amidst debates over certain amendments to the law.
According to the LIRS, Section 60 of the NTAA 2025 allows tax authorities to direct third parties who hold funds or owe money to a defaulting taxpayer to remit those funds directly to the LIRS. This will apply to unpaid taxes that have been assessed and finalized but remain unsettled.
Key Details of the Move:
- Tax Liabilities Affected: The substitution will apply to taxes like Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT) administered by LIRS.
- Third Parties Affected: Financial institutions, employers, debtors, business partners, tenants, and anyone owing money to the defaulting taxpayer.
- Mandate for Banks: Once served a substitution notice, banks and financial institutions are required to promptly remit the specified amount to LIRS from the taxpayer’s accounts.
- Failure to Comply: Non-compliance with a substitution notice is considered an offence under the NTAA 2025 and will attract penalties.
Public Notice Clarifies Key Procedures:
LIRS emphasized that this power will only be invoked when a taxpayer has failed to settle an established, due tax liability. The tax authority will issue notices to entities that hold or owe funds to the defaulting taxpayer, directing them to remit the specified amount directly to the LIRS.
Financial Institutions’ Compliance Obligations:
Banks and other financial institutions are particularly affected by this move. They will be required to:
- Remit funds as instructed by LIRS without delay.
- Confirm compliance through the LIRS e-Tax platform.
- Provide details regarding the taxpayer’s account balances and any encumbrances.
Failure to comply with a substitution directive will result in legal penalties.
A Step Toward Efficient Tax Collection:
The new measure is part of Lagos’ broader effort to enforce tax compliance and improve its revenue generation under the NTAA 2025 framework. The LIRS views the Power of Substitution as a lawful and efficient method for collecting outstanding taxes, ensuring that individuals and businesses meet their tax obligations.
As the NTAA 2025 rollout progresses, Lagos residents and businesses are urged to comply with tax regulations to avoid the risk of their funds being seized.
