The issue was fixed after I've added plugins: [tsconfigPaths(), react()] the following in the root of the second project

{
    test: {
        name: "unit",
        environment: "jsdom",
        setupFiles: ["./tests/setup.ts"],
        include: ["actions/__tests__/**/*.spec.ts"],
        globals: true,
    },
    plugins: [tsconfigPaths(), react()],
},