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The Lagos State Internal Revenue Service (LIRS) has warned taxpayers against using fake or artificial transactions to evade tax obligations, saying that such arrangements will be ignored under the Nigeria Tax Administration Act (NTAA), 2025.
The warning was contained in a public notice dated January 21, 2026, published on the LIRS website and signed by the agency’s Executive Chairman, Ayodele Subair. According to the notice, the directive applies to all categories of taxpayers operating in Lagos State, including companies, partnerships, trusts, individuals, and other stakeholders.
LIRS said the notice was issued to ensure compliance with newly gazetted tax laws and to promote transparency and fairness in tax administration within the state.
“In line with the provisions of the newly gazetted tax laws, the Lagos State Internal Revenue Service (LIRS) hereby issues this Public Notice to inform all taxpayers, including incorporated entities, partnerships, trusts, natural persons, and other stakeholders of the treatment of artificial or fictitious transactions for tax purposes,” the notice stated.
“This Notice is issued to ensure compliance with the legal framework and to promote transparency, accuracy, and fairness in tax administration within Lagos State.”
Citing Section 46 of the NTAA 2025, LIRS said it is empowered to disregard or adjust any transaction considered artificial or fictitious if it results in reduced tax liability.
“The law provides that where the relevant tax authority is satisfied that any disposition or transaction is artificial or fictitious and has the effect of reducing tax liability, it may disregard such transaction or make necessary adjustments to counteract the reduction of tax. The taxpayer shall be assessed accordingly.”
It added that transactions between connected persons, including related companies or individuals, may be treated as artificial if they are not conducted at arm’s length.
“Transactions between connected persons, such as related companies or persons, shall be deemed artificial or fictitious if, in the opinion of the relevant tax authority, they are not conducted at arm’s length—that is, not on terms that would reasonably be expected between independent persons dealing at arm’s length,” it stated.
The agency said taxpayers affected by such adjustments would be liable for revised assessments and any additional tax arising, although they retain the right to appeal.
“Any person in respect of whom a direction is issued under this section shall be liable for the revised assessment and any additional tax arising therefrom and has a right of appeal against the assessment,” the notice added.
LIRS also warned that it may recast or restructure arrangements designed primarily to minimise tax obligations.
“Artificial transactions may also expose taxpayers to investigations, audits, and penalties as prescribed under the NTAA, 2025,” it stated.
On compliance, the service directed taxpayers to ensure transactions are genuine and properly documented.
“Ensure that all transactions are genuine, commercially driven, and properly documented. Maintain full records supporting the legitimacy and commercial basis of each transaction,” the notice said.
It also urged taxpayers to disclose relationships with connected persons and to “ensure that dealings with such persons comply with arm’s-length principles.”
“Respond promptly to any LIRS request for clarification or documentation during tax reviews or audits,” it stated.
The notice further referenced the Income Tax (Transfer Pricing) Regulations, 2018, noting that LIRS may demand transfer pricing documentation for transactions involving companies and individual shareholders, including loans, leases, advances, and write-offs.
LIRS noted that failure to comply with the Act, including providing inaccurate information or engaging in artificial transactions, would attract administrative penalties.
The directive takes effect from January 1, 2026, in line with the commencement of the newly gazetted tax laws.
