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.