You have to first upload the funds to your paypal account and then process the refund as far as i am aware. If there are no funds in your account you cannot process a refund
I believe the funds will have to be uploaded before issuing the refund as stated above. Sometimes however it will just take it from your bank as a bank transfer refund, which makes the process longer.
As suggested above and as far as i know too that you need to upload funds from your CC to your paypal first for refunding. DON.
You must have funds in order to issue a refund, And if you do not have enough funds then the refund would be processed from your bank account.
What if the account holder's credit card is changed or expire? From where paypal will try to take the money?