We address and quantify the role of non-adiabaticity ("memory effects") in the exchange-correlation (xc) functional of time-dependent density functional theory (TDDFT) for describing non-linear dynamics of many-body systems. Time-dependent resonant processes are particularly challenging for available TDDFT approximations, due to their strong non-linear and non-adiabatic character. None of the known approximate density functionals are able to cope with this class of problems in a satisfactory manner. In this work we look at the prototypical example of the resonant processes by considering Rabi oscillations within the exactly soluble 2-site Hubbard model. We construct the exact adiabatic xc functional and show that (i) it does not reproduce correctly resonant Rabi dynamics, (ii) there is a sizable non-adiabatic contribution to the exact xc potential, which turns out to be small only at the beginning and at the end of the Rabi cycle when the ground state population is dominant. We then propose a "two-level" approximation for the time-dependent xc potential which can capture Rabi dynamics in the 2-site problem. It works well both for resonant and for detuned Rabi oscillations and becomes essentially exact in the linear response regime. This new, fully non-adiabatic and explicit density functional constitutes one of the main results of the present work.
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