The Lagos State Internal Revenue Service has disclosed that the new tax law empowers state revenue agencies to recover unpaid taxes by seizing funds from the bank accounts of employers, friends, business partners, tenants, and other third parties connected to a tax defaulter.

LIRS informed Lagos residents and business owners that the Nigeria Tax Administration Act, 2025 authorises the service to deduct outstanding taxes from rent payments, as well as from accounts belonging to business partners, family members and friends who hold money on behalf of a defaulting taxpayer.

According to the service, the law permits direct recovery where a taxpayer fails to remit an established tax liability when due, expanding enforcement beyond the defaulter’s personal accounts to include those of individuals or entities financially linked to them.

LIRS explained that under Section 60 of the NTAA 2025, the state may issue substitution notices to banks, employers, tenants and any person holding or owing money to a tax defaulter, directing them to remit such funds to the service in settlement of the debt.

“Where a taxpayer fails, neglects or refuses to settle any established outstanding tax liability when due, LIRS may exercise its power under Section 60 to direct any of the following persons to pay the amount owed by the taxpayer: banks and other financial institutions, employers, tenants, debtors, or customers of the taxpayer, agents, business partners, and any person holding money on behalf of the taxpayer and any person owing money to the taxpayer, whether presently due or accruing,” LIRS wrote in a statement. 

In such cases, LIRS said it would issue a substitution notice to the defaulter’s bank or to those of third parties holding funds on the taxpayer’s behalf. 

Financial institutions are mandated by law to notify LIRS of the account balance of the defaulter and those of their friends and family and remit the outstanding taxes “without delay.”

A receipt confirming payment of outstanding taxes is then sent to the LIRS e-Tax platform:www.stax.lirs.net.

The service warned that under the newly implemented law, failure to comply with a substitution directive constitutes an offence, noting that friends, business associates and other third parties connected to tax defaulters may bear financial responsibility where they are found to be holding funds belonging to the taxpayer.

The NTAA 2025, since its January 1 implementation, has generated rancour among lawmakers who accused President Bola Tinubu’s administration of making unapproved alterations in the gazetted versions.