Income is the difference between receipts and expenses incurred in the same tax period. A taxpayer is a natural person who generates an income. Income tax is a type of direct tax that belongs to the tax system of the Republic of Croatia. The development of income tax in the Republic of Croatia began in 1994 with the adoption of the Income Tax Act. Sources of income are income from employment, income from self-employment, income from property and property rights, income from capital and other income. According to the Income Tax Act, the total income is divided into two parts, so the annual income and the final income are determined. Employment work is any relationship between the employer and the employee in which the employee's work is based on the instructions of the employer. Receipts arising from employment are all the benefits that the employee is getting based on employment. Expenses arising from employment are all legally relevant expenses that are deducted from legally relevant receipts to determine income from employment. The annual income tax rate is 20% on the annual tax base of up to HRK 360,000.00 and 30% on the part of the tax base that exceeds the amount of HRK 360,000.00. In the Republic of Croatia, income tax is paid according to the deduction system. Income tax is characterized by frequent changes in positive legislation that are just proof of the adjustment of the state and the optimization of the tax system for the state to respond as successfully as possible to the roles taken in the life of the individual