Photo Credit: Babajide Sanwo-Olu/Instagram
It is officially the season of new rules. If you’ve been keeping an eye on your finances this month, you’ll know that the federal government ushered in a major structural reset on January 1, 2026, with the Nigeria Tax Act and the Nigeria Tax Administration Act. While those national updates were designed to simplify things across the country, the Lagos State Internal Revenue Service (LIRS) is now stepping in with its own specific enforcement.
The Executive Chairman of the LIRS, Ayodele Subair, issued a public notice on January 21, 2026, regarding the state’s “Power of Substitution.”
In the notice, the LIRS made its position clear, stating that the law:
…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.
If you were wondering how the new national laws would actually be felt on the ground here in Lagos, this is the answer. Essentially, if there is an established, unpaid tax bill with your name on it, the government now has a very direct way of settling the score.
See what this means for you below:
Wait, What is the “Power of Substitution”?
Think of it as a shortcut for the taxman. According to the Nigeria Tax Administration Act (NTAA), 2025, the LIRS doesn’t have to wait for you to make a transfer if you have a final, unpaid tax debt.
Instead, they can legally appoint a third party, like your bank or your boss, to pay that debt using the money they were supposed to give to you. It’s a lawful way for the state to recover unpaid Personal Income Tax, Capital Gains Tax, and even Stamp Duties.
Who Could Be Asked to “Pay on Your Behalf”?
This is where it gets interesting for us as residents. According to the LIRS, they can send a “substitution notice” to anyone holding money that belongs to a tax defaulter. This includes:
- Your Bank: They can be directed to remit funds straight from your balance.
- Your Employer: Your 9-5 salary could be tapped to settle the debt.
- Your Tenants: If you’re a landlord, your tenants could be asked to pay their rent to the LIRS instead of your account.
- Your Business Partners: Even customers or debtors who owe you money can be directed to settle the LIRS first.
What This Means for 9-5ers & Small Business Owners
According to the LIRS, the goal is simple: if you have an established final tax liability, the government can bypass the usual wait time and collect from those who hold your funds.
- For the 9-5er (The Employee): Your employer is effectively your first “substitution” point. If you owe personal income tax, the LIRS can direct your HR or Finance department to deduct the debt directly from your monthly salary. Under the NTAA 2025, your boss is statutorily required to comply—meaning that take-home pay”might be slightly less until the debt is cleared.
- For the Small Business Owner (The Entrepreneur): This is where it gets tactical. The LIRS can issue notices to your customers, tenants, or business partners. Imagine a client you’ve just invoiced receiving a letter from the LIRS telling them to pay the government instead of you. It’s a move that ensures the state gets paid, but it also means business owners need to keep their tax records impeccable to avoid awkward conversations with clients.
- The Shared “Bank” Reality: Whether you are an employee or an employer, your bank account is the most direct target. According to the LIRS notice, banks must remit specified amounts without delay once served. They are also required to report your available balances via the e-Tax platform.
The Must-Know Compliance Rules
According to the LIRS, once a bank or employer receives one of these notices, they must comply.
- Direct Remittance: Funds are sent directly to the LIRS, and banks must confirm this via the LIRS e-Tax platform.
- Offence: Refusing to comply with a substitution notice is actually a legal offence under the new Act.
- Your Right to Object: Don’t panic. You still have 30 days to object in writing to an assessment after receiving a notice.
