Over the past thirty years, income taxation has constituted a fundamental segment of the tax system in the Republic of Croatia, applied to the income of individuals sourced from various channels. The legal framework underpinning income taxation is the Income Tax Act, with its stipulations further elaborated through several ordinances. The current iteration of the Income Tax Act has been in force since January 1, 2017, undergoing numerous amendments and supplements designed to fulfil the objectives outlined in the 2016 National Reform Program, which entailed a comprehensive tax reform. Key amendments introduced by the new Income Tax Act include the following: the determination of income as both annual and final income; provision of an option for flat-rate income determination and tax payment for all taxpayers engaged in independent business activities (including trade and hospitality), subject to the fulfilment of additional legal requirements; the introduction of tax reliefs for pensioners as income taxpayers from dependent employment, and for taxpayers residing in the City of Vukovar or in Group I assisted areas, who derive income from dependent employment or conduct independent business activities within these zones; increments in tax bases; expansion of the list of non-taxable receipts; an increase in the basic personal allowance; tax liability reductions for young individuals; and the establishment of criteria for defining characteristics of dependent employment for taxation, with the specification that receipts gained through the misuse of tax benefits contrary to legislative intent are classified as income from employment. This paper presents an analysis of the taxation of income derived from dependent employment and independent business activities, which represent the two most prevalent income sources. Income from independent business activities is assessed either as annual income (based on required business records) or as final income (under flat-rate taxation). Particular focus is directed at instances within income taxation that stem from the misuse of tax benefits contrary to legislative purpose, where taxpayers report income from business relationships bearing the characteristics of dependent employment as income from independent business activities, subsequently applying the flat-rate taxation model to reduce tax and mandatory contribution obligations.