the_post_navigation seems to ignore same category filter

You mention a custom post type, are you also using a custom taxonomy? If so you need to specify this taxonomy in your function call:

the_post_navigation(array(
    'prev_text'=>__('previous project: %title'),
    'next_text'=>__('next project: %title'),
    'in_same_term' => true,
    'taxonomy' => 'wpse240053_custom_taxonomy_name',
));

By default the built-in category taxonomy for Posts is used. This requires WP4.4 or later.

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