You can use PayPal as a payment option to purchase Xbox LIVE Gold memberships (both new and renewal), Microsoft Points, and game content. PayPal is available in many, but not all, Xbox LIVE regions.
The following regions support PayPal as a payment option:
· Hong Kong
· New Zealand
· United Kingdom
· United States
Other regions are not supported at this time.
For information on how to add PayPal, see the following article:
908655 Add or edit Xbox LIVE payment options
(SOURCE : Microsoft KB 2544412 )