XML Signature element is not declared

You are very close. In your XSD, simply replace,

<xs:import namespace="http://www.w3.org/2000/09/xmldsig#" />

with

<xs:import namespace="http://www.w3.org/2000/09/xmldsig#" 
           schemaLocation=
    "http://www.w3.org/TR/2002/REC-xmldsig-core-20020212/xmldsig-core-schema.xsd"/>

and your XSD will no longer have that error, and your XML will be valid against your XSD.

Explanation

XSDs can be composed via xs:import and xs:include. In both cases, the location of the referenced XSD has to be specified with a required schemaLocation attribute, which was missing in OP's original XSD. By adding xs:import/@schemaLocation as shown above, the error is eliminated.

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Update #1:

When you switched to use a local XSD, you made a mistake in your xs:import:

Change

 <xs:import namespace="http://www.w3.org/2000/09/xmldsig#"
            schemaLocation="http://www.w3.org/TR/2002/REC-xmldsig-core-20020212 
                            file:///C:/Temp/xmldsig-core-schema.xsd"/>

to

 <xs:import namespace="http://www.w3.org/2000/09/xmldsig#"
            schemaLocation="file:///C:/Temp/xmldsig-core-schema.xsd"/>

(You were following an example for @xsi:schemaLocation in XML documents which has namespace-location pairs; xs:import/@schemaLocation is different.)

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Update #2:

So my question is how to fix it because in edit mode XML is valid 100%?

Perhaps this is the disconnect. Editing an XML file in Visual Studio does not automatically validate it against an XSD. You need to do that in code or via a validating XML editor such Oxygen XML Editor or XML Spy.

Also, your C# validation code may have issues. See Validating an XML against referenced XSD in C#

If you don't want to change anything to xsd or xml - do the following:

1. (optional) Download xsd from w3 site and save to local disk. W3 site is VERY slow because a lot of software worldwide constantly request those schemas. If you will use that xsd directly - you will often fail by timeout. Some validation tools already have such schemas cached locally, but not .NET validator.

2. Modify your validation method from UPDATE 2 the following way:

   public static bool IsValidXml1(string xmlFilePath, string xsdFilePath, string namespaceName)
   {
       XDocument xdoc = null;
       var settings = new XmlReaderSettings();
       settings.DtdProcessing = DtdProcessing.Ignore;
   
       try
       {
           using (XmlReader xr = XmlReader.Create(xmlFilePath, settings))
           {
               xdoc = XDocument.Load(xr);
               var schemas = new XmlSchemaSet();                    
               schemas.Add(namespaceName, xsdFilePath);                   
               using (var fs = File.OpenRead(@"D:\Temp\xmldsig-core-schema.xsd")) 
               using (var reader = XmlReader.Create(fs, new XmlReaderSettings() {
                   DtdProcessing = DtdProcessing.Ignore // important
               })) {
                   schemas.Add(@"http://www.w3.org/2000/09/xmldsig#", reader);
               }
   
               xdoc.Validate(schemas, null);
   
               return true;
           }
       }
       catch (XmlSchemaValidationException ex)
       {
           // throw;
       }
   
       return false;
   }
   

You have to add that schema using XmlReader and not directly, because if you add directly (like in your update 2) - it will fail to parse DTD block, because when you add XmlSchema to XmlSchemaSet using url (or file path) - it will read that file using XmlReaderSettings with DtdProcessing = DtdProcessing.Prohibit. We need to change that to DtdProcessing.Ignore or DtdProcessing.Parse. After that your validation method will work fine for target xsd and xml file, without any changes (and will correctly fail in case xml does not match xsd).