Owing Tax in Lagos? The State May Collect From Your Bank or Tenant

A new kind of alert has been making the rounds across WhatsApp groups and office status updates in Lagos: the state government is changing how it collects overdue taxes. This time, it is not just reminders or penalties. The shift signals a more direct approach that could affect banks, tenants, employers and business partners.

At the centre of the development is a public notice issued by the Lagos State Internal Revenue Service (LIRS). The agency explained that when taxpayers fail to settle what they owe, it now has an additional enforcement tool that goes beyond traditional methods of tax recovery.

In the notice, LIRS stated:
“The NTAA 2025 empowers the Lagos State Internal Revenue Service to direct any person holding money on behalf of, or owing money to, a taxpayer who has failed to pay an established final tax liability when due, to remit such money to the Service in settlement (or partial settlement) of the outstanding tax.”

For many Lagos residents and business owners, the implication was striking. The notice makes clear that where a taxpayer defaults, LIRS can issue a directive to a bank, employer, tenant, debtor or business associate holding funds for that taxpayer, requiring them to remit the money directly to the tax authority.

LIRS referred to this mechanism as “the Power of Substitution,” describing it as “a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes.” According to the agency, the measure applies across its revenue streams, including Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax.

Unpaid Taxes: Why Your Bank or Tenant May Pay LIRS Instead

In practical terms, the policy could affect a wide range of everyday transactions. A landlord collecting rent, a bank holding business accounts, or a partner preparing to pay an invoice may all fall within its scope. Under the framework, such parties could receive a substitution directive instructing them to send funds to LIRS rather than to the taxpayer in default.

Once such a remittance is made, the notice explains that “the tax liability is deemed paid to the extent of the remittance made pursuant to the substitution.” However, the consequences for ignoring a directive are explicit. LIRS warned that “failure to comply with such directive constitutes an offence under the Act.”

The notice also outlines specific obligations for recipients of substitution orders. Banks are required to “remit the stated amount to LIRS without delay and provide confirmation of compliance through the LIRS e-Tax platform,” while also reporting “the taxpayer’s available balances and any encumbrances as may be requested.”

Employers, tenants and other affected parties are similarly directed to “withhold the specified amounts from funds due to the taxpayer and remit them to LIRS within the timeframe stated in the notice.”

Despite the firm tone, LIRS noted that there is still room for redress. Recipients who disagree with an assessment may file a written objection within 30 days.

For Lagos, the announcement represents more than a routine administrative update. It marks a turning point in tax enforcement, extending the reach of revenue collection into the financial relationships that underpin daily business and economic life in Africa’s busiest city.