Apparently, this is a fraud prevention method by PayPal that prevents orders with delivery addresses in a country different than the one in which the buyer's PayPal account is registered in from being processed. That's not a bad practice except that it might create some problems under certain circumstances:
You are selling digital products where no delivery address is set and parsed to PayPal
Expatriates who have existing PayPal accounts but currently located in a different country
One workaround is to have a look at the PayPal IPN file in includes/modules/payment/ and then search for this string:
$parameters['address_override'] = '1';
This is a PayPal API to help the buyer with payment when they get to Paypal. With out all the data fields this causes an error message. With the circumstances as described above, it results in an error message too.
Change it to:
$parameters['address_override'] = '0';
This will tell PayPal not to retrieve the billing and shipping data from your cart and use the current default data in PayPal's record. The one downside of this is that it might confuse the buyer when he pays as the shipping address will reflect the one he/she has on record in PayPal rather than the one they just entered in your shopping cart.
So, either way, there's a trade off.
One method I've seen a merchant using osCommerce do is to provide information up front in their payment policy page which goes something like this:
Paypal shipping country issue
A big thank you to one of our customers who reported this:"Paypal does not allow your country of residence to ship to the country you wish to"
Paypal displays this message if you have entered a delivery address in a different country to the one you registered with your Paypal account. Paypal does this to protect you from fraud. If you see this message, please contact us to arrange a manual Paypal payment, confirming your delivery address. We will send you a link which you can click on to complete your order.This seems like a good non-programmatic method.
New 
