The business world is subject to constant changes that require speed, innovation, motivation and efficiency of every person who starts a business venture. Modern times, social life, modern technologies and computerization greatly affect the state of the market. If companies and their owners want to survive on the market, they must keep up with the times. The economy and the market as it exists today are the result of long-term work over the centuries. Croatia is a transitional country, and in terms of entrepreneurship, it still lags far behind the developed part of the world. Therefore, the Croatian legislation tries to improve the situation in the sector of small and medium enterprises through numerous grants. Also, Croatia's entry into the European Union gives positive results in the economy. The tax system is divided into several tax forms that are in accordance with the instructions of the European Union. The paper presents a detailed overview of the Croatian tax system. In addition to the tax system, institutions for the development and encouragement of entrepreneurship in Republic of Croatia also play an important role. Namely, through various programs implemented within the institutions, efforts are being made to improve the economy. The sector of small and medium enterprises has been popular in the global, European and Croatian economy for many years. Considering this, it is not surprising that this sector is given great importance and investments.