The situation surrounding a Hong Kong man accused of murder in Taiwan has become a diplomatic dispute — and it concerns the sensitive issue surrounding Taiwan's sovereignty as the self-ruled island enters its election season.

The case will "feature heavily in Taiwan media once he returns," said Kelsey Broderick, China analyst at risk consultancy Eurasia Group. She said that Taiwan President Tsai Ing-wen and her Democratic Progressive Party (DPP) could benefit "if they portray the incident as example of the party being tough on China and tough on crime."

Chan Tong-kai allegedly murdered his girlfriend in Taiwan, before fleeing to Hong Kong in February 2018. He has said he wants to surrender to Taiwanese authorities. But on Wednesday, Chan was released from a Hong Kong prison as authorities in the two territories tussled over how to deliver him to Taiwan, as it does not have an extradition agreement with the city.

Tsai and her ruling party are "certainly looking" to secure political capital ahead of the election as they present themselves as defenders of Taiwan's sovereignty, said Zhixing Zhang, senior East Asia analyst at geopolitical intelligence firm Stratfor.

"Essentially, Taipei is playing up the sovereignty matter in the current legal disputes, arguing that the Hong Kong government's refusal to establish a legal framework plays into Beijing's "One Country" narrative, and undermines Taiwan's judicial independence," Zhang told CNBC in an email.

Beijing considers self-ruled Taiwan to be a wayward province and and has been using increasingly aggressive rhetoric toward the island to push for a reunification after a civil war split the two territories 70 years ago.