Why LIRS's NTAA Implementation Requires Your Immediate Attention

On 21 January, the Lagos State Internal Revenue Service (LIRS) issued seven public notices signaling an intensified enforcement of the Nigeria Tax Administration Act (NTAA). These notices mark a significant shift in tax enforcement across Lagos State, affecting all individuals and businesses operating within Nigeria's commercial hub.

The public notices introduced and clarified several critical compliance measures that will directly affect individuals, corporate entities, partnerships, trustees, financial institutions, tax advisers, and other intermediaries operating within Lagos State. These measures include the imposition of administrative penalties for non‑compliance, assignment of tax debts to authorised third-party agents, exercise of the tax authority’s substitution powers, mandatory disclosure of tax planning arrangements, obligations to notify changes in taxpayer particulars, and the compulsory use of Tax Identification Numbers (TIN) in all official, financial and transactional documents. For Lagos taxpayers, understanding these NTAA 2025 requirements is critical to avoiding penalties and maintaining good standing with LIRS.

This article provides a concise yet comprehensive overview of each public notice and highlights the key compliance measures that individuals and businesses in Lagos State must consider to ensure full compliance with their tax obligations.

1. Administrative Penalties for Tax Non-Compliance Under NTAA 2025

The Lagos State Internal Revenue Service (LIRS) notified all taxpayers, employers, agents, and taxable entities within Lagos State of the commencement of administrative penalties under the Nigeria Tax Administration Act, 2025 (NTAA).

Effective from 1 January 2026, LIRS imposed administrative penalties for non-compliance and contraventions of the NTAA. These include failure to register with LIRS, late or non-filing of tax returns, late payment or non-payment of taxes, failure to deduct or remit taxes withheld, submission of false or misleading returns, obstruction of authorized tax officers, failure to maintain proper records, and non-compliance with information requests issued by LIRS.

Penalties will include monetary fines, calculated based on factors such as the nature and seriousness of the offence, frequency of non-compliance, amount of tax involved, duration of default, and whether the taxpayer voluntarily disclosed the default. LIRS reserves the right to apply maximum penalties or initiate criminal prosecution in cases involving deliberate evasion, fraud, or persistent non‑compliance. Taxable persons who voluntarily disclose defaults before detection by LIRS may be eligible for reduced penalties, subject to compliance with the condition in the Act. Disclosure must be complete, truthful, and accompanied by payment of outstanding taxes and accrued interest.

LIRS will notify affected taxable persons of imposed administrative penalties through formal assessment notices, electronic communication, or other authorized means. Failure to comply with penalty notices could trigger further enforcement actions, including garnishment of bank accounts, distraint, enforcement of liens, or prosecution.

Taxable persons could request clarification on the imposed penalties, apply for review or objection withinstatutory timelines, seek advance rulings on compliance obligations, and/or access dispute resolution mechanisms provided under the NTAA.

Accordingly, LIRS urged all taxpayers and taxable entities to review their tax compliance status, regularize outstanding obligations, file and remit taxes as required by law, and engage proactively with the Service to avoid penalties and enforcement actions.

2. LIRS Power to Assign Tax Debt Collection to Third-Party Agents (Section 68)

The Lagos State Internal Revenue Service (LIRS), acting under Section 68 of the Nigeria Tax Administration Act, 2025 (NTAA), notified the public of its power to assign the collection of outstanding tax debts to duly authorised third‑party agents. This measure is introduced to enhance tax compliance, expedite recovery of unpaid taxes, and ensure clarity regarding the roles and responsibilities of both taxpayers and authorised collection agents.

Where a taxpayer fails to settle outstanding tax liabilities after all statutory enforcement procedures have been exhausted, LIRS may delegate the recovery of such debts to an appointed agent. Approved agents may include financial institutions, licensed debt‑recovery practitioners, collection companies, and other entities formally accredited by LIRS.

It is however important to note that the assignment of a tax debt does not absolve the taxpayer of their obligation. Any payment made to an authorised agent is deemed a valid payment to LIRS. Taxpayers remain fully liable for any outstanding balance not recovered by the agent. LIRS also reserves the right to take further enforcement actions where necessary, including reassignment of the debt, substitution, distraint, garnishee proceedings, or prosecution.

Authorised third‑party agents engaged for this purpose are required to notify taxpayers of their assignment in the manner prescribed by LIRS, collect outstanding tax debts and remit all payments exclusively through the LIRS e‑Tax platform. They must maintain accurate and comprehensive records of all engagements, submit periodic reports to LIRS, and conduct all recovery activities in a lawful, fair, professional, and confidential manner. Agents who fail to comply with these obligations may have their authorisation withdrawn and may be held liable for any loss arising from negligence or misconduct. They may also raise objections to their assignments where permitted under LIRS guidelines.

Taxpayers whose debts have been assigned to authorised agents are required to respond promptly to all communications issued by such agents, provide accurate and complete information to facilitate recovery, and settle outstanding liabilities within the timelines stipulated. Taxpayers must also notify LIRS immediately where any dispute exists in relation to the debt. Failure to cooperate with an authorised agent constitutes non‑compliance and may result in penalties, interest, and further enforcement actions under the NTAA, including potential criminal sanctions for deliberate evasion or obstruction.

3. Power of Substitution under Section 60 of the Nigeria Tax Administration Act, 2025

Where a taxpayer fails to settle outstanding tax liabilities, the government ordinarily pursues recovery directly from the taxpayer. However, Section 60 of the NTAA grants the tax authority the power of substitution, which allows it to recover unpaid taxes through third parties connected to the taxpayer.

Relying on the above provision, LIRS reiterated that it is empowered to issue substitution notices directing persons to remit funds or owing money to the taxpayer to remit specific amounts directly to the tax authority. This includes banks, employers, tenants, customers, agents, business partners, or other relevant parties.

Once such a notice is issued, the person served is legally required to remit the amount specified in the notice from funds belonging to or payable to the taxpayer. Where the recipient of the notice does not hold funds belonging to the taxpayer, the law requires that the tax authority be notified accordingly within the specified period.

Failure to comply with a substitution notice may expose the person served to enforcement measures, including recovery actions as though that person were originally liable for the tax debt. However, the law allows the recipient to object to the notice within thirty (30) days, and the objection and appeal procedures applicable to tax assessments will apply.

4. Mandatory Disclosure of Tax Planning Arrangements in Lagos State

The NTAA also introduced a disclosure regime aimed at improving transparency in tax planning arrangements. Section 30 of the Act requires any person who enters into, or intends to enter into, a transaction or arrangement whose principal purpose is to obtain a tax advantage to disclose such arrangement to the relevant tax authority.

For the administration of this section, the Lagos State Internal Revenue Service (LIRS) issued the public notice to further explain how the provisions of the Act will be implemented in Lagos State. The guideline provides a broad explanation of the concept of a tax planning arrangement, defining it as any action, transaction, structure, or series of steps designed, marketed, or implemented to obtain a tax advantage or reduce a tax liability in respect of any tax administered by LIRS.

This includes taxes administered by LIRS, such as personal income tax, capital gains tax, stamp duties relating to individuals, withholding tax on payments involving individuals or sole proprietors, and other taxes within the Agency’s jurisdiction.

In general, arrangements that require disclosure are those designed primarily to obtain a tax benefit, exploit loopholes in tax legislation, shift income or assets without corresponding economic substance, involve non-arm’s-length dealings between related parties, convert taxable income into non-taxable income, or defer income primarily to obtain a tax advantage. Arrangement relating to: (a) Routine commercial transactions with genuine economic substance; (b) Tax planning expressly provided for under law (e.g., statutory exemptions, tax credits); (c) Transactions fully compliant with arm’s-length standards where documentation exists; (d) Internal reorganizations with no tax-avoidance motive and no change in beneficial ownership. routine commercial transaction, do not require disclosure.

The disclosure obligation applies to taxpayers as well as advisers, promoters, consultants, accountants, and other intermediaries involved in designing or implementing such arrangements. Where multiple persons are involved in the arrangement, each person has an independent obligation to ensure disclosure unless it can be demonstrated that disclosure has already been made.

Disclosure must be made within thirty days of the date the arrangement is implemented, the date the taxpayer becomes aware of it, or the date any transactional document or instrument is executed.

According to LIRS, although disclosures are treated as confidential, the information disclosed may be used by the tax authority for audit, risk assessment, enforcement actions, and inter-agency cooperation as permitted by law.

5. Taxpayers’ Obligation to Notify Changes in Address or Particulars

The NTAA also place a statutory obligation on taxpayers to notify the relevant tax authority of any changes in their registered details.

Under Section 9(1) and (2) of the Nigeria Tax Administration Act, 2025, every taxable person must notify the relevant tax authority within thirty (30) days of any change in their particulars. Such changes may include a change in trading name, registered address, business location, email address, or other contact information. The obligation also extends to structural or ownership changes within an entity.

For instance, incorporated entities are required to disclose persons holding at least five percent of their share capital or the beneficial owners of shares held through nominees. Trusts must provide details of trustees and beneficiaries, while partnerships are required to disclose the identity and contact information of all partners. The law also requires notification of significant business events such as mergers, acquisitions, takeovers, liquidation, or any transfer of ownership.

Consequently, the Lagos State Internal Revenue Service now mandates that individuals, incorporated entities, partnerships, and trusts review their registration details with the LIRS; submit updates on any changes in address, contact information, ownership structure, or other relevant particulars within 30 days of such change; and utilize official channels provided by the LIRS for the submission of updates, supported by relevant documentation. Taxpayers are further reminded that the accuracy of their information forms part of their e-tax compliance obligations

6. Mandatory TIN Requirements for All Official and Financial Transactions

The Lagos State Internal Revenue Service (LIRS) has reaffirmed that the Tax Identification Number (TIN) must be included in all official and transactional documents as part of ongoing efforts to strengthen compliance under the NTAA. This requirement is in furtherance of the enforcement of the provision of Section 8 of the Act, which requires the mandatory issue of Tax ID on:

a.    a return notice, correspondence or documents submitted, lodged or used for the purposes of tax compliance;

b.    a document prepared, produces, issued or submitted in respect of a transaction; and

c.     a condition for entering into a contract with any federal or state ministry, department or agency and local government.

Accordingly, all documentation related to tax compliance, financial transactions, procurement, contracts, or official correspondence must reflect the correct TIN. This applies to individuals, corporate entities, financial institutions, and all government ministries, departments, and agencies, and documents submitted without a valid TIN may not be recognized for processing and could be rejected. applies to individuals, corporate entities, financial institutions, and all government ministries, departments, and agencies.

LIRS emphasizes that the use of a TIN is now a mandatory requirement for participating in government contracts, public procurement processed, and for submitting applications or correspondences to any ministry, department or agency (MDAs) and LIRS. Organizations and individuals are expected to ensure that their records are current and that all documents consistently include their TIN to facilitate smooth processing and maintain compliance with statutory obligations.

Additionally, financial institutions—including banks, insurance companies, and stockbroking firms are required, before initiating or maintaining any transaction or account with a taxable person, to ensure that such person provides a valid Tax Identification Number

7. Treatment of Artificial Transactions under the Nigeria Tax Administration Act, 2025

It is a well-established principle in transfer pricing and related-party transactions that such dealings must be conducted at arm’s length. In essence, where a company transacts with a connected person, the pricing and commercial terms must reflect those that would have been agreed between independent parties acting in their own economic interest.

Section 46 of the Nigeria Tax Administration Act, 2025 provides the relevant tax authority with a broader anti-avoidance mechanism. Under this provision, the tax authority may disregard any transaction or make the necessary adjustments where it is satisfied that the arrangement is artificial or fictitious and has the effect of reducing tax liability.

A transaction may be considered artificial where it is not conducted on arm’s-length terms that is, where the terms imposed differ from those that would reasonably be expected between independent parties in comparable circumstances. In such situations, the tax authority may recast the transaction and assess the taxpayer accordingly.

Based on this, the Lagos State Internal Revenue Service requires that all taxpayers, including individuals, corporate bodies, partnerships, and trusts, ensure that all transactions are genuine, commercially driven, and properly documented; maintain full records supporting the legitimacy and commercial basis of each transaction; disclose relationships with connected persons and ensure that dealings with such persons comply with arm’s-length principles; and respond promptly to any request from the LIRS for clarification or documentation during tax reviews or audits.

In Nigeria, this principle has already been provided for in the Income Tax (Transfer Pricing) Regulations 2018, which require taxpayers to disclose transactions between related entities where at least one party is a non-corporate entity (individual). Furthermore, the LIRS reserves the right to demand transfer pricing documentation for transactions between a company and its individual shareholders, including but not limited to shareholder loans, write-offs of balances, leases, advances, and similar arrangements.

The NTAA also introduces a disclosure regime aimed at improving transparency in tax planning arrangements. Section 30 of the Act requires any person who enters into, or intends to enter into, a transaction or arrangement whose principal purpose is to obtain a tax advantage to disclose such arrangement to the relevant tax authority.

For the administration of this section, the Lagos State Internal Revenue Service (LIRS) issued guidelines which further explain how the provisions of the Act will be implemented in Lagos State. The guideline provides a broad explanation of the concept of a tax planning arrangement, defining it as any action, transaction, structure, or series of steps designed, marketed, or implemented to obtain a tax advantage or reduce a tax liability in respect of any tax administered by LIRS.

This includes taxes administered by LIRS, such as personal income tax, capital gains tax, stamp duties relating to individuals, withholding tax on payments involving individuals or sole proprietors, and other taxes within the Agency’s jurisdiction.

In general, arrangements that must be disclosed include those designed primarily to obtain a tax benefit, exploit loopholes in tax legislation, shift income or assets without corresponding economic substance, involve non-arm’s-length dealings between related parties, convert taxable income into non-taxable income, or defer income primarily to obtain a tax advantage.

The disclosure obligation applies to taxpayers as well as advisers, promoters, consultants, accountants, and other intermediaries involved in designing or implementing such arrangements. Where multiple persons are involved in the arrangement, each person has an independent obligation to ensure disclosure unless it can be demonstrated that disclosure has already been made.

Disclosure must be made within thirty days of the date the arrangement is implemented, the date the taxpayer becomes aware of it, or the date any transactional document or instrument is executed.

Although disclosures are treated as confidential, the information may be used by the tax authority for audit, risk assessment, enforcement actions, and inter-agency cooperation as permitted by law.

Strategic Compliance: Your Path Forward Under NTAA Enforcement

Collectively, these directives underscore the State’s commitment to improving compliance, enhancing transparency, and expanding the tools available to the tax authority for monitoring, assessment, and recovery of tax obligations. For businesses and professionals operating in Lagos, these NTAA enforcement measures require immediate attention and proactive compliance planning.

The notices serve as both a warning and an opportunity, signalling heightened enforcement while providing taxpayers with the clarity needed to adjust their practices and achieve sustained compliance under the NTAA. Early compliance will not only minimise the risk of penalties or enforcement actions but will also position taxpayers to manage their obligations more effectively as the LIRS intensifies oversight.

Frequently Asked Questions: LIRS NTAA Enforcement

What are the 7 LIRS public notices on NTAA enforcement?

On January 21, 2026, LIRS issued seven public notices covering: (1) Administrative penalties for tax non-compliance, (2) Assignment of tax debt collection to authorized third-party agents under Section 68, (3) Substitution powers allowing direct recovery from third parties under Section 60, (4) Mandatory disclosure of tax planning arrangements, (5) 30-day requirement to report changes in taxpayer information, (6) Mandatory use of Tax Identification Number (TIN) in all transactions, and (7) Treatment of artificial transactions under anti-avoidance rules in Section 46.

When did LIRS start enforcing administrative penalties under NTAA 2025?

LIRS began imposing administrative penalties for tax non-compliance effective January 1, 2026. The public notice was issued on January 21, 2026, clarifying the types of violations subject to penalties including failure to register, late filing, non-payment, false returns, and obstruction of tax officers.

What is the penalty for late tax filing in Lagos State?

Under NTAA 2025, LIRS imposes monetary fines calculated based on the nature and seriousness of the offense, frequency of non-compliance, tax amount involved, duration of default, and whether voluntary disclosure was made. LIRS reserves the right to apply maximum penalties or pursue criminal prosecution for deliberate evasion, fraud, or persistent non-compliance.

Can LIRS assign my tax debt to a collection agency?

Yes, under Section 68 of NTAA 2025, LIRS can assign outstanding tax debts to authorized third-party agents including financial institutions, licensed debt-recovery practitioners, and collection companies. Any payment made to an authorized agent is deemed valid payment to LIRS, but taxpayers remain fully liable for outstanding balances.

What is an LIRS substitution notice under Section 60?

A substitution notice is a legal directive issued by LIRS to third parties (banks, employers, tenants, customers, agents) holding funds belonging to or payable to a taxpayer, requiring them to remit specified amounts directly to LIRS for tax debt settlement. Recipients must comply within the specified period or face enforcement measures, though they have 30 days to object.

What tax planning arrangements must be disclosed to LIRS?

Under Section 30 of NTAA 2025, arrangements requiring disclosure include those designed primarily to obtain tax benefits, exploit tax loopholes, shift income without economic substance, involve non-arm's-length related-party dealings, convert taxable to non-taxable income, or defer income for tax advantage. Disclosure must be made within 30 days by taxpayers, advisers, promoters, and intermediaries.

How long do I have to notify LIRS of address changes?

Under Section 9 of NTAA 2025, taxpayers must notify LIRS within 30 days of any change in trading name, registered address, business location, email address, contact information, ownership structure, or other particulars. This includes mergers, acquisitions, liquidations, and transfers of ownership.

Is TIN mandatory for all transactions in Lagos State?

Yes, under Section 8 of NTAA 2025, Tax Identification Number (TIN) is mandatory for all tax compliance returns and correspondence, financial transaction documents, and government contracts with federal or state ministries, departments, agencies, and local governments. Documents without valid TIN may be rejected and not recognized for processing.

Who must obtain a TIN in Nigeria?

All individuals, corporate entities, partnerships, trusts, financial institutions, and government MDAs must obtain and use a valid TIN. Financial institutions must verify TIN before initiating or maintaining transactions or accounts. TIN is mandatory for government procurement and public contracts.

What are artificial transactions under Section 46 NTAA?

Artificial transactions are arrangements not conducted on arm's-length terms where pricing and commercial terms differ from what independent parties would agree in comparable circumstances. LIRS can disregard such transactions or make necessary adjustments where they reduce tax liability, particularly for related-party transactions and shareholder dealings.

Can I get reduced penalties through voluntary disclosure to LIRS?

Yes, taxpayers who voluntarily disclose tax defaults before detection by LIRS may be eligible for reduced penalties under NTAA 2025. Disclosure must be complete, truthful, and accompanied by payment of outstanding taxes and accrued interest to qualify for penalty reduction.

What happens if I don't comply with these LIRS notices?

Non-compliance can result in monetary penalties, garnishment of bank accounts, distraint of assets, enforcement of liens, suspension or withdrawal of business licenses, criminal prosecution for fraud or evasion, and in cases of substitution notices, third parties may be held liable as if originally responsible for the tax debt.

Does voluntary disclosure eliminate all penalties?

No, voluntary disclosure may reduce penalties but does not eliminate them entirely. Taxpayers must still pay outstanding taxes, accrued interest, and reduced penalties. The extent of penalty reduction depends on factors including completeness of disclosure, timing, and cooperation with LIRS.

Who should I contact for tax planning arrangement disclosures?

Tax planning arrangement disclosures should be submitted to LIRS through official channels within 30 days of implementation. For guidance on disclosure requirements and procedures, contact LIRS directly or consult with qualified tax advisers familiar with NTAA 2025 disclosure obligations.

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Disclaimer:

This article is provided for general informational purposes only and does not constitute legal, tax, or professional advice. The contents reflect a summary and analysis of the public notices issued by the Lagos State Internal Revenue Service and should not be relied upon as a substitute for specific professional guidance. For further clarification or advice on how these developments may affect your organization, the Tax and Regulatory Practice Group of SHQ Legal is available to provide tailored legal and compliance support. You may direct any questions to us by sending an email to info@shqlegal.com or call: +234 9139362545