Foreign tourists to Argentina will be reimbursed for the VAT on their hotel stays in the country.

The new measure, to be introduced immediately, aims to make the South American country competitive.

VAT in Argentina stands at 21% and the new policy will cost the country more than £30 million.

However, the move is expected to help attract an extra 95,000 tourists generating an additional £56.22 million, according to tourism minister Gustavo Santos.

The measure will apply to accommodation and breakfast, when the latter is included as part of the accommodation package, and the reimbursement will take place immediately at the point of payment.

In order to qualify, payments must be made with a foreign credit or debit card. Tourists will need to provide name and surname, nationality, residency and passport or ID number.

If bookings are made by travel agencies or tour operators, these will need to provide this information on behalf of their clients.

A Bill in favour of the measure emphasised the importance of tourism to the Argentine economy, and the need for “a simple, direct and automatic mechanism to reimburse VAT to foreign tourists, in order to improve the competitiveness of the Argentine tourism industry”.

The measure came as Aerolíneas Argentinas and Spanish carrier Air Europa extended a joint collaboration.

The new agreement opens up new routes in Europe for Aerolíneas Argentinas through codeshare flights operated by Air Europa via Madrid to Gatwick, Lisbon, Bilbao, Vigo and La Coruña and via Barcelona to Palma.