Profit taxis one of the most important types of taxation. Althoughi tissimilar to income tax there are also a lot of differences. The biggest difference between these two taxes is in the tax payer. An in come tax is imposed on individuals (natural person) and profit tax on companies (legal person). Profit tax has been integrated in most modern taxation systems and its widespread application began in 20th century. The most common problem in applying profit taxis the problem of double taxation. This cannot be fully avoided but it can be reduced by applying classical and transmisive systems of profit sharing. The overlapping of these two taxes creates an impact on the shareholders who are affected by both types of these taxes. Undistributed profit is taxed first followed by another taxation of distributed income tax. The reason for applying tax relieves, tax exemptions and tax incentives is in the concept of neutrality of the system and in applying the flat rate tax. The first part of this paper gives a short history of taxation from its beginnings. It talks about theinfluence taxation systems had on entire civilizations, both on their appearance and collapse. Listed in the paper are basic and most important set of principles a country follows to minimize the resistance topaying taxes. In addition to that, the paper comments on the effects of taxing profit on foreigninvestments with the emphasis on Croatia and countries within the region. Also, it looks at what effectan increase of foreign investment has on each county. Listed in the paper are also fundamentalelements in profit taxation. Furthermore, justification for paying profit tax is explained from differentpoints of view giving a valid need for its existence.The second part of this paper talks about tax rates according to the Law on Profit Tax. Tax rates are analyzed and shown in schematic diagrams and compared with tax rates of other EU countries within acertain time frame. Also, the paper talks about EU’ intentions to finally harmonize the tax systems with in the countries of EU by applying measures and guidelines. Included at the end of this paper arethe latest amendments to the Law on Profit Taxin Croatia.