A 965(i) transfer agreement is a complex tax transaction that can save multinational corporations millions of dollars in taxes. Essentially, it allows companies to transfer accumulated foreign earnings into the United States at a lower tax rate than would normally be required.

At its most basic level, the 965(i) transfer agreement is a provision of the Tax Cuts and Jobs Act (TCJA) that was passed in December 2017. The TCJA made a number of changes to the U.S. tax code, including a one-time tax on the accumulated foreign earnings of U.S. companies.

Under the TCJA, U.S. companies are required to pay a tax of 15.5% on cash and cash equivalents held overseas, and 8% on non-cash assets, such as property and equipment. However, this tax can be offset by foreign tax credits and certain other deductions.

The 965(i) transfer agreement allows companies to elect to pay the tax over eight years, in equal installments. This deferral can be helpful to companies that want to bring their foreign earnings back to the U.S., but would otherwise face a large tax bill.

To take advantage of the 965(i) transfer agreement, companies must file a statement with the IRS indicating their intention to make the election. They must also make the first installment payment within one year of the due date for their tax return for the year in which the foreign earnings were accumulated.

It`s important to note that the 965(i) transfer agreement is only available to corporations that are considered to be U.S. shareholders of a specified foreign corporation (SFC). A U.S. shareholder is defined as any U.S. person who owns 10% or more of the voting power of an SFC.

In addition, the 965(i) transfer agreement is subject to a number of complex rules and limitations. For example, companies may not be able to use foreign tax credits to offset the tax liability imposed by the agreement.

Overall, the 965(i) transfer agreement can be a useful tool for multinational corporations looking to repatriate their foreign earnings. However, given the complexity of the tax code and the potential risks of noncompliance, it`s important to work with experienced tax advisors and legal counsel to ensure that the transaction is structured correctly.