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Bunuel
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c is the correct option. Use of "they" does not make just makes the option wordy.
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Every year, around June or July, John and Jane, sometimes joined by friends, go on their annual vacation, that they usually spend in Indonesia.


A. Every year, around June or July, John and Jane, sometimes joined by friends, go on their annual vacation, that they usually spend in Indonesia --- wrong usage of that.

B. John and Jane, sometimes joined by friends, go on their annual vacation, that they usually spend in Indonesia, around June or July --- same as A

C. Every year, around June or July, John and Jane, usually accompanied by friends, go on vacation, usually spent in Indonesia - correct

D. Around June or July, John and Jane, sometimes accompanied by friends, go on their annual vacation, which they usually spend in Indonesia --- usage of "they" is ambiguous

E. John and Jane, sometimes joined by friends, go on their annual vacation, which they usually spend in Indonesia, around June or July every year --- same as D

Why is option D correct, are not the pronouns "their" and "they" a bit ambiguous. Their can refer to John and Jane, as well as friends.
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