As per the recent feature release for the Show Hierarchy Toggle feature - "When this feature is ON, users are going to see only the top level issues (work items) in a project - these are the issues that don’t have a parent or the parent is not part of the current project."

There is currently a limitation on the hierarchy functionality where we are not able to show issues with a parent from another project. However, this does not seem to be the case always. Due to the hierarchy clause on the behind the scene JQL project = \"<project_name>\" AND (hierarchyLevel = <highest_level" OR parent is EMPTY), we are continuing to show issues at the Top level on the hierarchy that does have parents in another project.

Therefore, we aren't exclusively displaying Top-level issues (with no parent or parent in another project), or only Top-level issues with absolutely no parents within the project or outside. Instead, we seem to be providing a mixed result set - "Hierarchically Top Level issues in a project, irrespective of whether they have a parent issue in other projects and other issues in lower hierarchical levels with no parent (within or outside the project)"-which can be confusing for end users about the intent of the "Show Hierarchy" toggle

It will be better to include in the result set, either issues with parents on a different projects as well OR issues with no parents.
Note: Even, if the user has the Browse project permissions in the other project, the Parent issues from the other project will not be visible.