Forward Pricing

Forward Pricing – Forward pricing refers to a method of determining the price of a transaction in advance, based on future market conditions or expected values. It is commonly used in futures/derivatives markets and transfer pricing to provide certainty and avoid disputes over pricing at a later date. In international taxation, forward pricing is often applied through Advance Pricing Agreements (APAs), where multinational companies and tax authorities agree in advance on the pricing of cross-border related-party transactions for a specified period. This helps prevent transfer pricing conflicts and tax adjustments.

Examples: Advance Pricing Agreement (APA) – Predetermining transfer prices between related companies in different countries. Forward contracts – Locking in a price today for a commodity/asset to be delivered in the future. Subscription or service contracts – Fixing future pricing to avoid uncertainty due to inflation or market fluctuations. In short, forward pricing provides predictability and compliance by fixing the price of future transactions well ahead of time.