Profit tax, along with income tax, belongs to the category of direct tax forms, which is an integral part of the business of almost all legal entities in the Republic of Croatia. The tax base is determined in accounting by applying International and Croatian financial reporting standards. The profit tax base determined in this way is subject to corrections that are legally conditioned according to tax regulations, and are the result of inconsistencies between items that determine profit for accounting and tax purposes. The resulting differences are categorized into permanent, that is, those whose effect on the tax base is constant and does not depend on the accounting period, and temporary differences, whose effect is canceled after the initial application, and are recorded in the categories of financial statements as deferred tax assets and deferred tax liabilities . Taking into account that these categories have a great effect on the company's profit, it is extremely important for entrepreneurs to be knowledgeable and educated about the positive and negative aspects of permanent and temporary differences. The aim of this paper is to define what and how permanent and temporary differences can affect the tax base when determining the company's profit. The taxpayer and all the main determinants of income tax are defined, and after the theoretical concept has been worked out, a comprehensive example of the tax declaration using the Income Tax Declaration Form is presented.