According to GlobalData, 29% of offshore wealth held by millionaires is booked in the US. This proportion will only increase as the country cements its status as the premier tax haven.

The US is not normally the first place that comes to mind when thinking of offshore havens. Yet, it is the preferred offshore destination among global millionaires.

Traditional booking centers, such as the Cayman Islands or even Switzerland, only attract a fraction of its volume. So what makes the US so attractive among the world’s rich?

Of course, Uncle Sam has a lot to offer. Deep and liquid financial markets attract listings from all over the world, and have impressed with staggering returns over the past few years. This combined with a sound legal and regulatory system has been of great appeal to investors.

Indeed, results from GlobalData’s 2017 Wealth Managers Survey show that general diversification benefits and access to a better range of investment options are important considerations when it comes to millionaires’ booking center preferences.

However, there is more. The US has emerged as the biggest tax haven in the world, sheltering the rich’s assets from the taxman perfectly legally.

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For example, states such as Delaware, Nevada, South Dakota, and Wyoming are attractive destinations for those looking to minimize their tax liabilities.

More than 1 million companies are registered in Delaware (which is more companies than people in the state), and over 60% of the US’s largest companies are headquartered there. Privacy is easy to come by when the true owners of companies in these states don’t need to be publicly disclosed.

Meanwhile, South Dakota has been able to attract a large number of domestic and foreign nationals in recent years, not only because of its strict secrecy rules but also because the state does not charge personal income or corporation tax.

Tax efficiencies

While not the prime offshore driver, tax efficiencies continue to represent a strong draw among the world’s wealthy. And despite burdening the rest of the global community with FATCA – a law that compels US citizens at home and abroad to file annual reports on any foreign account holdings – the ‘Land of the Free’ continues to free, or at least alleviate, the rich from their tax burdens.

Globally, the country is one of the few that refuses to participate in the OECD’s Common Reporting Standard, the international version of FATCA, claiming it is has signed bilateral data-sharing agreements.

But these agreements may not necessarily be reciprocal in nature, information is not shared on an ongoing basis, and the information provided is often patchy, meaning account balances are not shared and ownership structures are not necessarily revealed.

Consequently, the US is becoming increasingly interesting from a tax perspective for those who are more creative when it comes to tax efficiencies.

This is something that will further cement the country’s position as an offshore hub for the rich, but will not make it very popular among the world’s tax enforcement agencies.