Methods and apparatus are provided for spatially varying residue coding. An apparatus includes a video encoder (300) for encoding picture data for at least a block in a picture by selecting a spatially varying encoding method for a residue corresponding to a difference between an original version of the block and at least one reference block. One or more transforms are used to transform a portion of the block and a remaining area of the block is encoded using an alternate encoding method with respect to the one or more transforms or is not encoded.