This Master Thesis outlines the accounting and tax treatment of leases with special emphasis on the application of International Financial Reporting Standard 16 - Leases and its impact on the financial performance of the selected lessee. Lease tax treatment is shown through profit tax, value added tax and income tax. In the research part, the method of description and comparison was used, and it has proved the impact of IFRS 16 - Leases on the financial indicators of the selected company, but also on greater transparency of financial reporting. At the beginning, the lease and its characteristics were conceptually defined, and the rental market in the Republic of Croatia was analyzed. The accounting and tax treatment of leases is delineated in Chapters Three and Four. The fifth chapter is the research part where specific company is presented and financial statements of the selected company for year 2018 and 2019 are analyzed and the effects of the application of IFRS 16 on the financial statements in 2019. In the end of the research part, the research results are presented.