The Lagos State Internal Revenue Service (LIRS) has warned individuals and corporate entities against engaging in artificial or fictitious transactions aimed at reducing tax liabilities, declaring that such arrangements will be disregarded under the Nigeria Tax Administration Act (NTAA), 2025.
In a public notice dated January 21, 2026, and signed by the Executive Chairman of LIRS, Ayodele Subair, the agency said taxpayers found culpable may face investigations, additional tax assessments, penalties, and interest charges.
The notice, sighted on the LIRS website on Sunday, applies to all categories of taxpayers operating within the state, including incorporated companies, partnerships, trusts, and natural persons.
The agency noted that Section 46 of the Tax Act, empowers tax authorities to ignore or adjust any transaction deemed artificial or fictitious if it has the effect of reducing tax liability.
“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 notice stated.
The agency noted that transactions between connected persons, such as related companies or individuals, would be considered artificial if they are not conducted at arm’s length, meaning on terms that would reasonably apply between independent parties.
It stressed that any taxpayer affected by such adjustments would be liable for revised assessments and any additional tax arising from them, although the law allows a right of appeal.
The revenue service further warned that it reserves the power to recast or restructure any arrangement primarily designed to evade or reduce tax obligations.
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“Artificial transactions may also expose taxpayers to investigations, audits, and penalties as prescribed under the NTAA, 2025,” the agency said.
On compliance, the LIRS directed taxpayers to ensure that all transactions are genuine, commercially driven, and properly documented, adding that full records must be maintained to support the legitimacy and commercial basis of such dealings.
It also instructed taxpayers to disclose relationships with connected persons and ensure that all related-party transactions comply with arm’s length principles.
The notice referenced the Income Tax (Transfer Pricing) Regulations, 2018, which require disclosure of transactions between related entities, including those involving non-corporate parties.
It said it may demand transfer pricing documentation for transactions between companies and individual shareholders, including shareholder loans, leases, advances, and write-offs.
The agency warned that failure to comply with the provisions of the Act, including the submission of inaccurate information or participation in artificial transactions, would attract administrative sanctions.
The public notice takes effect from January 1, 2026, in line with the commencement of the newly gazetted tax laws.
