Lagos Unveils New Tax Law Allowing State to Seize Funds From Bank Accounts, Friends, and Family of Defaulters
The Lagos State Internal Revenue Service (LIRS) has clarified that Nigeria’s newly enacted tax framework authorises state revenue authorities to recover unpaid taxes by accessing funds held not only by defaulting taxpayers but also by third parties linked to them.
PulseNets learnt that the powers are contained in the Nigeria Tax Administration Act (NTAA) 2025, which permits tax authorities to deduct outstanding liabilities from rent payments and from bank accounts belonging to employers, tenants, business partners, family members, or friends holding money on behalf of a tax defaulter.
According to information obtained by PulseNets, the law broadens tax enforcement mechanisms by allowing direct recovery once a taxpayer fails to settle an established tax obligation when due, even if the funds are not domiciled in the individual’s personal account.
LIRS explained that Section 60 of the NTAA 2025 empowers the service to issue substitution notices to banks, employers, tenants, debtors, and any individual or entity owing or holding money for a defaulting taxpayer, directing such persons to remit the funds to the state in settlement of the tax debt.
In a formal notice, the agency stated:
“Where a taxpayer fails, neglects, or refuses to pay an established tax liability when it becomes due, the Service may invoke its powers under Section 60 to direct banks and other financial institutions, employers, tenants, debtors, customers, agents, business partners, or any person holding or owing money to the taxpayer—whether immediately payable or accruing—to settle the outstanding amount.”
PulseNets reported that once a substitution order is issued, LIRS may serve the notice on the taxpayer’s bank or on third parties holding funds on the individual’s behalf, effectively redirecting the money to cover the outstanding tax obligation.
Under the law, financial institutions are required to disclose relevant account balances to the service and remit the assessed tax liability “without delay,” including where the funds are linked to associates or relatives of the defaulter.
Confirmation of payment is subsequently issued electronically, with receipts uploaded to the LIRS e-Tax platform at www.stax.lirs.net, according to officials who spoke to PulseNets.
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The agency further warned that non-compliance with a substitution notice now constitutes a legal offence, stressing that friends, business partners, and other connected third parties may be held financially liable if they are found to be in possession of funds belonging to a defaulting taxpayer.
PulseNets also learnt that the NTAA 2025, which took effect on January 1, has continued to spark controversy, with some federal lawmakers accusing the Bola Tinubu administration of introducing alterations not approved in the officially gazetted version of the law.
