Bits of transfer pricing - Two is more than one but...

Being involved in recent tax authority ("TA") audits I noted that in few cases the source of the issue was that taxpayers applied two different methodologies to support the arm's length nature of a tested transaction. Being more concrete: usually both CUP and TNMM were applied to justify the tested transaction, referring to as "primary" and "secondary" methodology, and arguing that "primary" methodology has some defects and therefore the application of a "secondary" methodology is applied. ??? - the first reaction of the inspector followed by annoying questions: If there is a defect why use it? Why you did not make an adjustment to correct the defect? Why is the difference in the application of the methods?....and that is it - the problem is there TA gets confused wants to understand the "defect" and going forward TA wants to apply a best method as prescribed by the local rule. How? Either they create something from the existing documentation or ignoring the documentation TA creates a third methodology to show the arm's length price, range, etc. but the result is almost the same i.e. adjustment in the corporate tax base. 　

 I know that there are complex transactions where we think that using more methods gives us more comfort or by having a weak internal CUP instead of leaving the CUP we believe that using a secondary method will save our position. And, yes in very few cases it may work but it is very important to argue carefully not to leave many space for confusion and creative interpretations. To be compliant with the local transfer pricing rules in Hungary choosing one method is OK though it has to be the best one!