In an angry statement on Sunday, the Ligue 2 club accused French authorities of demanding an "outrageous" payment of 200 million euros to stay in the French championship without having to move, while the French federation (FFF) said it was the principality club who brought up the subject and the figure.
Monaco, top of Ligue 2 and on course for promotion back into the top flight, have attracted many leading players over the years helped by the fact that, under the principality's laws, foreigners do not pay tax on their wages.
The French League (LFP) has ruled that the club must move their head office to France by the start of June next year, meaning players would pay tax in France.
"ASM FC, after consultation with its legal counsel, has decided that it has no other choice but to bring legal action in order to obtain a judicial resolution of the dispute," the club said on Sunday.
"As part of this legal action, ASM FC will be seeking the annulment of the LFP's decision of March 21 requiring the club to establish its headquarters in France, as well as a claim for damages from the LFP as compensation for financial and commercial losses suffered as a result of that decision."
Monaco said French federation president Noel Le Graet, "acting on behalf of both the FFF and the LFP, demanded from AS Monaco FC a huge payment of 200 million euros in return for ending the current conflict without the club having to relocate its headquarters to France in order to remain in the French Championship."
Monaco said the demand was made at a meeting between Le Graet and club owner Dmitry Rybolovlev, a Russian billionaire who took over in December 2011, last Friday in Paris.
"The position of the club is very clear: ASM FC considers that such a demand is not only outrageous but also totally unacceptable," Monaco said.
The French federation said it was Monaco who brought up the figure.
"The French football federation had decided (on April 18) to set up a meeting between the Federation, the French Professional League (LFP) and AS Monaco FC. Preliminary talks started with representatives from AS Monaco FC, during which the sum of 200 million euros was mentioned by AS Monaco FC," the FFF said in a statement.
"In order to prepare for this meeting between all the parties concerned, an encounter was organised last Friday, at the request of the club, between Mr Le Graet and Rybolovlev, in the presence of Mr Willy de Bruyn, the AS Monaco Football Club administrator.
"At the end of this meeting, it was agreed that the representatives of the Federation, the LFP and AS Monaco FC would reconvene during the week of May 20."
- Sports & Recreation