I found the solution. I had the same problem and even posted on this community but didn't get straight answer from support.
Well, I thought about the solution for a couple of days and I actually found the solution myself.
It is not QBO side settings.
You have to remove the history of "Permissions you've given" under Account > Security on PayPal.
After that, back to QBO and proceeded "Connect to PayPal" . It worked like a charm.
