The formula
VAT is charged as a percentage of the net price. To take it out of a gross price, divide: net = gross ÷ (1 + rate). The tax is gross − net. To add it, multiply: gross = net × (1 + rate).
A 120 price at 20% contains 20 of VAT, not 24. Subtracting 20% from 120 applies the rate to a base that already includes the tax, so it removes too much. Check any answer by adding the tax back: 100 × 1.2 = 120.
Why the share matters
The VAT inside a gross price is always a smaller share than the headline rate: one sixth at 20%, about 16% at 19%, about 9% at 10%. That share is the ceiling for any tourist refund, before operator fees. Read how to remove VAT from a price for worked examples, and why a refund is usually smaller still.
Reduced rates exist in many countries. Use the rate printed against the item on the invoice.